Plan your retirement wisely

Most Americans save for retirement over their professional lives. It pays to think of your future while you are young and active as you need more and more money for a happy life in the old age.

There are many reasons for a young professional to start saving:

• The average retirement period is getting longer because of the younger average retirement age and increased life expectancy. A 65-year-old man can expect to be over 80. According to the National Center for Health Statistics, about 1 million Americans will live to be at least 100 years old by 2050.
• Even if you put aside an adequate amount of money, your savings will likely be eroded by inflation. The main inflation indicator Consumer Price Index (CPI) has risen on average 4.4% a year since 1960. This means that you will buy less for the same money when you retire than you can now.
• Social Security payouts are insufficient for most retirees. Besides, recently fears have hovered over the future of Social Security and Medicare systems as the growing number of retirees can jeopardize their financial stability.
• If you plan to retire before 67, you need to provide for yourself since Social Security is now available only to people over 67 for people born in 1960 or later.

The sooner you start to save and invest, the more you will accumulate over years. If you start a few years earlier, it can drastically increase the income available to you at retirement.

Your retirement investment plan should be carefully programmed. You need to settle two basic issues: where to get the money and how to invest it.

• Money can come from:
• A retirement plan. You can set aside a certain proportion of your income or a specified fixed amount for retirement investment. If you follow a plan offered by your employer, the employer will match all or some of your contributions.
• Bonuses and other windfalls are excellent opportunities to supplement your retirement savings.
• You can figure out a way to invest more by setting a plan of everyday savings on small purchases. Even if you save a $100 a month, this can make a big difference as your savings bring a return over a few decades.
There are many opportunities to invest. You can choose different types of assets like stocks, bonds, ADRs, tap best-performing mutual funds. All you need is to map out a strategy and maintain a balanced approach.
You can start out with asset allocation, that is, distribution of your investments in broad asset classes such as stocks, bonds or money market instruments. Or you can pick the best assets and plan your asset allocation accordingly.