Retirement…Are you really planning to invest?

There is no way someone can invest with nothing. Your investments are  usually affected by many factors over which you have little or no  control, such as inflation, political instability, unemployment rates  and positive or negative financial news.

Two things you can control are how much money and where you invest, both of which might change significantly as you age. How you invest after you retire will likely be quite different from the way you invest during your prime earning years.

Experts suggested some way forward.

First of all, you need to establish your current financial condition. So as to know how to endup at your final destination, you have to know where you are financially, that means you need to know how much money  you have coming in, how much you have going out, and what your assets and liabilities are.

Experts say you have to determine your current and anticipated future needs. This part of your financial plan is as much art as science because no one can reliably predict the future. Use your cash flow statement to determine how much money you need to live on each year, and multiply that figure by the number of years you expect to live after retirement.

According to Forbes magazine, if you retire at age 65, you can expect to live for at least another 14 years. Subtract your known income sources, such as Social Security, pensions and/or 401(k) and IRA money from the amount you need to live on during your retirement.

Whatever is left is the amount of money you must have available in your savings and investments to draw on during your retirement years. If you don’t have that much available, you’ll need to produce some additional income to make up the difference, or else lower your income  expectations.

Make an investment plan that suits your level of risk tolerance, while best meeting your needs for growth and income. Consider that you will likely be drawing on your principal as well as any earnings, such as interest or dividends, which your investments might produce.

They said as you prepare your retirement savings portfolio, the first thing you should do is set aside money for emergency purposes (three months’ living expenses is usually the minimum amount recommended). The emergency fund gives you a cushion in the event of illness, natural disaster or any other unforeseen expense, and it provides a backup in the event of another economic crisis. Just make sure you can easily access your emergency money if the need ever arises. Once you’ve got that taken care of, you can explore relevant investment opportunities.

Treasury bill is also one of better options. They have a fixed rate of interest, which means you’re guaranteed at least that much growth over the life of the bond; it won’t earn you as much money as a good stock market gamble, but it will certainly earn more than a bad one.

Another option financial advisors recommend is an annuity. You put money into an annuity, either in a lump sum or over time (before you retire, naturally), and in return you receive regular payments back, almost like a salary. There are different kinds of annuities but the type being made popular in Nigeria through the Pension Reform Act (PRA) 2004 is called Immediate Annuity.

Section 4 of the PRA allows an employee to use the amount accumulated in his Retirement Savings Account (RSA) for the purchase of either programmed withdrawal or life annuity at retirement or attaining the age of 50 years whichever is the latter.

Retirement is not the time to put most of your money into high-risk investments. All you need to do is to ensure that you have a secure financial base to last the remainder of your life, which could practically be several decades. Whatever money you put into a high-risk investment could be lost, so you need to balance things out with low-risk financial opportunities.

TIAMIYU ADIO ISMAIL