Retiring Comfortably Requires Sound Financial Planning For Most Of Us - By: Stephen Daniels

For most people, ensuring a comfortable retirement requires life-long financial planning. Taking the proper steps early to plan for the future will prevent a lot of stress and worry that could arise as people approach that age. Because of the occasional tendency to lose sight of the big picture, especially during the cyclical years of economic recessions, it might be hard to imagine how saving and investing now will translate into financial comfort later. With sound advice and a sensible plan, one's golden years can be spent in relative ease.

By some estimates, less than a quarter of all Americans are actively planning their retirement. Whatever the reasons, this could lead to a lot of broken dreams for many people as they approach their "golden years." The earlier one begins to plan and save, the greater the benefits one can receive from compound interest. As savings pile up month to month, greater amounts of interest are earned. It's a positive cycle that will result in more money for the future. Another benefit of starting early is the ability to take a little more risk with the hope of higher returns. As one ages, financial advisors will often recommend being more conservative, since there is less time to make up for losses as the result of high-risk investments that don't work out as hoped.

Retirement planning is important for a number of reasons. One's quality of life in the future hinges largely on actions taken in the present. The biggest danger is outliving one's savings; essentially, this means that money saved for the future fails to provide for future needs. People are living longer lives, and on average, inflation runs at about 3 percent annually. Taxes and the cost of living will likely continue to increase. All of these factors can contribute to savings being stretched too thin, or worse, running out. Should this happen, one may have to work through retirement to make ends meet. Even worse, it may push a retired person into retirement. Sensible planning goals are meant to avoid financial ruin, at all costs.

The days of generous company pensions are, for the most part, gone. It is common knowledge that Social Security cannot be counted on to provide for peoples' needs in the future, which makes financial, investment and estate planning even more important. In general, planning consists of several concrete steps, each of which is an involved process. They include:

* Determining financial objectives - setting income goals for the future

* Assessing your current situation and re-assessing as you get closer to your targeted retirement age

* Making a plan based upon the assessment and implementing it as a savings and investment strategy

A good plan utilizes a variety of investment vehicles, such as conventional savings accounts, money market accounts, CDs, stocks and bonds. Annuity insurance policies are very popular as well, as they can be created to guarantee a known amount of monthly income, or can guarantee solid assets for heirs in the case of your demise. The plan should not only entail how to save and grow money for future use, but how income will be allocated during retirement.

Independent financial planners will help you sort through the many retirement plans available. From IRAs and Roth IRAs to 401K plans, there are numerous options, all of which have their own intricacies and governing rules. All genuine plans are tax-deferred, at the least, while most plans permit deductible contributions. Some plans will allow early withdrawal, but most assess heavy penalties for withdrawing your own money.

It's no wonder the average individual is confused about the right investment vehicle. In many cases, some of the investments available to you are employer defined, but when offered the opportunity to save with employer matching, this is an attractive offer that should be carefully considered. An independent planning service can be extremely helpful when used to figure out the details.

Planners also help one understand risk and how to gauge your tolerance level for it. A savings and investment plan should be diverse. It should balance riskier, potentially higher-yield investments with vehicles that deliver lower but reliable returns. There are no guarantees when it comes to investing money; however, planning earlier lets an individual be bolder now and eventually take on more conservative approaches with age.

With foresight and prudence, a financial planner develops a comprehensive strategy that serves an individual's needs without exposing him/her to undue risk beyond one's tolerance levels. A planner helps an investor see the value in a gradual savings scheme, dispelling any notion that it all has to be accomplished at once. Perhaps more than anything, a retirement planner helps one keep their future goals in clear view while staying on track to realize them.

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