A Retirement Planning Primer 

Does your retirement seem years and years away? While it may appear this way, you owe it to yourself to look ahead and begin giving thought to a time in your life that may account for 20 or more "golden" years. Granted, time may be on your side. However, if you quiz some of your older peers, they will probably tell you that saving for retirement is not as simple as it may initially appear. The fact is, there are many factors that will ultimately determine the type of retirement you will enjoy. 

Inflation. You’re probably aware that inflation can deteriorate your savings over the course of time. But, how seriously do you take inflation? Did you know that at 3 percent inflation, $100 today would only be worth $34.44 in thirty-five years?  The key is to seek retirement savings avenues that have the best chance of out-pacing the long-term effects of inflation. 
Taxation. One of the few constants in developing a retirement savings plan is the impact of taxes. Your present income level, tax bracket, and the types of tax-advantaged retirement vehicles available to you can all play an integral part in how your plan develops. It’s important to maximize pre-tax contributions to employer-sponsored plans or an IRA (Individual Retirement Account) in order to take advantage of the tax-deferred nature inherent to such plans. 

Diversification. For many individuals, deciding how to invest pension and profit-sharing plan assets can be an unsettling experience. Most people know it is imprudent to invest everything in a single security, even if it is a “blue chip.” Thus, it’s important to spread your risk over a variety of investment options and create an investment mix that is consistent with your overall objectives. This holds true for investments within your retirement plan, as well as those outside. 
Discipline. One of the key ingredients of retirement plan success is the need for a disciplined approach to saving. By making regular contributions to your employer-sponsored plan or IRA, you can maximize the power of compounding interest (the ability to receive additional interest on interest already earned). With a steady flow of contributions, your retirement assets have a greater chance of reaching your long-term goals. 

Personal Savings. With factors such as inflation, taxation, and overall investment performance to contend with, there is a distinct possibility that retirement plan assets may eventually fall short of sustaining future income levels. It may be necessary to supplement traditional retirement plan income with personal savings and investments in order to meet your long-term retirement income goals. Therefore, it is important to save and invest, in addition to making retirement plan contributions in order to be prepared for a potential shortfall. 

The earlier you recognize the variables that will shape your retirement planning, the greater the likelihood that you will have the right strategy in place to achieve your long-term objectives. However, an understanding of these principles alone, will not guarantee future success. By taking an active role in the years ahead, you will help your chances of securing a comfortable retirement.