Do you worry about retirement?

Board-with-retirement-sign

If you don’t worry about it, you should. No matter how old you are, age will catch up with you and retirement will come. Our grandparents were lucky, the order of the day allowed children to be one’s retirement plan. My maternal grandfather had 11 wives and 77 children, I sincerely hope that this retirement plan worked for him, but that’s not what I heard via the grapevine. However, if you are young, that is usually the least of your worries because as a young person, you generally think old age is for old people. Sad, but true. I used to be like that as well, I used to look at my dad and would wander how someone would get to be so old. I just hope if you are reading this article, you don’t make the same mistakes I did. Below is a popular statement in investment;

‘The best time to invest was yesterday, the next best time is today and the worst time is tomorrow”

Randel Tiongson

No truer statement has been said about investment. You need to start investing early in your career, when you start early that means your investments can take higher risk and they are time diversified. Time diversification means your volatile returns can be smoothened out by the effects of time. This investment will be able to go through a lot of bull and bear markets, and still give you a good return. However, this only happens if you have time and are willing to leave it in there for a long time. This is different from speculation. Speculation is when you dip your money in and out of different things, getting small returns and moving on to the next investment. You might see yourself as making profits but when one considers the commissions and taxes, you might find yourself not so well off. Get a good company, do your due diligence, put your money in and brace for whatever comes, you are young and you can ride any business wave that will come your way.

If you are in the middle ages, now you need to diversify your asset classes a bit more. Consider the very safe investments such as government and muncipal bonds and the risky investments such as shares. Because you still have time but not as much time as you had at the beginning of you career, so for the time that’s already gone, you need safety. But remember, its a give and take, you go for safe investments that means the return on your investment will be lower. However, it’s not all gloomy because you have risky assets that might give you a good return….and might also give you some depressing losses with moderate time to ride these out. So risky investments….are that…they are risky, it can go very well and it can go otherwise. There is a small rule that’s used to determine what percentage of your portfolio should go to safe investments and risky investments

120 – n

n…being for age

So if you are 25, that means 120-25 which is equal to 95%. So the 95% goes to riskier investments …buying stocks…and 5% goes to safe investments…bonds. If you are 50…70% to riskier assets and 30% to safe investments. Simple.

If you are old, its too late for you. You will die poor. I am joking, you can invest in annuities. An annuity is an investment that is modelled in a way to cushion one from longevity risk. Longevity risk…the risk that you will outleave your savings. So when you invest in an annuity, it then pays you out an annual amount for survival until death. Pretty cool huh.

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