Financial planning for retirement should be an entire career long strategic plan. Planning actually is planning of what is to be done and how is to be done in future.
Financial planning is a planning of making and arranging you finances in such a manner that they can prove a handful when you require them. Retirement is a stage of an individual life where he is no longer employed with the job he used to carry on until a certain age.
To start with financial planning for retirement the first thing that needs to be kept in mind is how the expenses are going to change when you will get retire. It greatly involves the then situation of your spouse and children. An individual should start planning for it as early as he joins his first job. Financial planning for retirement needs an assessment based on rewards and risks. As the rule says the higher the amount of risk the greater the reward you are supposed to get. So the financial planning must be a complete balance between risk and reward.
When you are at a younger age say 20 to 30 an individual should risk the possibilities by investing in shares, stocks and mutual funds. When you are comparatively older then you should invest in things that will fetch you long term benefits even at lower interest rates. If you are investing at even much older age such as 60 or so then it is advisable you invest 65 to 70 percent of your money in bonds,15 to 20 % in growth funds and 5 to 10 percent in long range return funds.
Currently, there are several pension plans and retirement plans available in market which can suffice an individual’s retirement need. These plans also cover the Income tax exemptions act. Moreover there are several plans available with the employers also. An individual needs to take interest in the same and find out the best suitable according to his financial conditions and financial needs. Popular retirement accounts include Individual Retirement Accounts (IRAs) and work based plans such as 401 (k) accounts.
IRAs are special accounts that provide you with savings along with tax advantage.
In this type of accounts the money is tax free until an individual withdraws it and moreover it can lower your taxable income also.
Work based plans came into existence as traditional pensions are becoming less popular. Thus, employers are giving these options to save money while you work for your retirement.401 K plan in example of such a plan that is provided generally by private companies. These plans work in a way that the agreed upon amount between you and your employer directly goes to your retirement account even before coming into your pay cheque thus also lowering the amount on which you are required to pay taxes.
An easy way to do financial planning for your retirement is the use of Retirement Planning Calculator. This calculator enables you to track currently at what position you are and how much you require saving to suffice your retirement needs. This calculator asks for facts such as yours and yours spouse age, your current income, expected annual percent raise in income, your life expectancy, amount you will be requiring at your retirement ,your life expectancy etc. Once you track regarding the required savings you need to identify that there are three basic strategies to invest money for retirement.