Like all things in life, good things come to those who wait.
Financial readiness for retirement is no different. It may seem pointless
contributing funds each month to a finance house and not see any real gain
for years. But the earlier you start the better the return in 20 or 30 years
time.
In my opinion, it’s foolish to rely on government pension
schemes or the group scheme you may have at work for your financial security
when you do retire. Chances are most of these are controlled by investment
firms that may turn a profit each year if the markets are good to them. Returns
are normally estimated and not guaranteed. But on top of this there are fees to
be paid for their services and related taxes on payouts. Did the fund beat the
inflation mark consistently? I am not knocking Retirement Annuities at all; I
contribute to 1 each month at work and privately. And am sure the funds that
have accumulated may be of use in the future.
My idea of a secure retirement does not only rely on my work
scheme benefits or my annuity fund alone. Having all your eggs in 1 basket may
set you up for disappointment when it’s too late. The tax benefits on an
annuity are great and that’s my main reason for having one, but having income
generated for life is by far the best security you could obtain.
Most people talk about passive income e.g. affiliate
programs etc, but I still maintain the ultimate passive income comes in the
form of dividends or rental income from fixed property. I do agree that investing
in property is out of reach for most people (it still is for me apart from our
primary residence) but with perseverance and drive, you can get your hands on an
investment property to help boost your net worth and income. Consider investing
in listed property if fixed property isn’t to your liking. As time goes on your
property’s capital value will escalate and so does your rental income each year
depending on your agreement with your tenant. If you find that after a while
the property game is not one you interested in, you can sell it for a profit a
few years down the line. Everyone needs a place to live, and there isn’t a
factory creating more land. The profits can be invested whichever way you deem
fit.
The closer you get towards retirement the less risk most
people are willing to take. If you are younger and have a longer investment horizon,
you can take advantage of more aggressive and risky investment vehicles. As
time goes on these choices then change to more moderate, then conservative
investment choices. There is a large debate as to whether your primary
residence is an asset or liability. Most see it as an asset because it
increases in value over time; some see it as a liability because it doesn’t
make you money each month but costs you money. Is it better to rent or buy?
That’s up to you and your budget and financial plan.
This is how I have currently broken up my retirement
contributions:
·
I have unit trusts that are starting to perform
consistently
·
I recently setup an automated payment to buy low
risk stocks with good dividend ratios
·
I contribute monthly to a private retirement scheme
·
I contribute towards an Emergency salary fund
that I set up
·
Also we paying down debt as fast as possible to
start saving for a cash deposit on a small flat we will rent out.
These are the steps I have taken; I have researched a lot of
options and got advice from many. This is what made sense to me. I try to
actively make the best financial choices possible, but I seek advice before I
do. Read the fine print on everything, find out about hidden costs if any, look
past the pictures of people jet skiing on glossy pages. Always make informed
and educated investment choices. Anything that says we can double your
investment overnight should be investigated with a fine tooth comb.
I hope this article was interesting for you to read and
helpful.
No comments:
Post a Comment