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February 15th, 2016

Ignite your retirement planning


Part 2 in a series on aligning lifestyle goals and financial planning/investment

In part one of this series, ‘Recommitting to your financial success in the year ahead’ we talked about the importance of your financial health in your New Year’s resolutions. But while setting New Year’s resolutions may be easy enough, keeping them can be a lot harder. With Carnival ending it is important to stay focused.

In the months ahead,your aim should be to commit at least 10% of your monthly net income after reductions and taxes to regular investments, including retirement.

Plan for retirement now

It doesn’t matter how young you are, as long as you’re working you’re old enough to start thinking about your retirement. Retirement may seem a long way off but it will soon become a reality that you have to face. Putting off dealing with it won’t help you in the long run. In part one of this series we showed you the importance of compounding in making investments and it plays even more of an important role when thinking about retirement.

Consider this:Putting $4,000 a year (about $333 a month) into a retirement account starting at age 22 gives $1 million by age 62, assuming 8% average annual returns. Wait 10 years to start contributing, and you’d have to put in more than twice as much –  $8,800 a year –  to reach the same goal. The more years you have to save, the higher your potential returns in the end.

Company pension plan not enough

Don’t rely too heavily on your company’s pension plan to provide money for retirement. More often than not, this proves to be inadequate and should be supplemented by a personal retirement vehicle such as UTC’s Universal Retirement Fund. Our Individual Retirement Unit Account (IRUA) and Pensions Plusalsooffer guaranteed income upon retirement for life.

A personal retirement fund and careful financial planning can provide enough money for you to weather the ups and the downs of your golden years.

Life changes

You’ll need to create a financial plan as soon as possible that takes into account all your major life changes right up until retirement. This will allow you to be better preparedfor most, if not all, the issues that will impact your income and expenses, when you are no longer earning a regular salary.

These issues may revolve around your social circumstances, lifestyle, longevity and health-care issues. Your expenses at retirement will also be impacted by other economic factors such as inflation. Planning will help you to minimize the negative effects of inflation on your ability to purchase goods and services when their prices increase over time.

This will help you to avoid being in a position where you are unable to meet your financial commitments – bill payments, university fees for your teenaged children, medical expenses, home repair expenses,among others – after you retire

Start saving now

  • Start saving now! Time is crucial in investing. The more time you give your investments to grow, the better returns you’ll see in the end.                                                              
  • Proper planning is the key to building a sustainableretirement fund.
  • Try to avoid making withdrawals from your retirement fund as this can lessen the amount of money earned on compounding.