A comfortable retirement is what most of us want to have. Most people still depend on when to retire on social security; and so they start to worry when they are nearing their retirement age because they often question themselves: Is my social security enough to retire on and enjoy the comfortable lifestyle that I’m dreaming to have? A lot of people want to retire wealthy, and yet they do not understand that waiting for monthly social security paycheck after retirement is definitely not the kind of retirement that they are planning to have, most especially if they want to savor each moment of the remaining years of their lives.
This is one of the reasons why we really recommend to start investing. Investing part of our income as early as possible is the most important thing that we must do while we are still employed — this is referred to as early retirement planning, which is the best option that we could take. Through investing, we are saving up for our future, while at the same time, we are growing these funds into profits. Investing through the wise allocation of assets is the best thing to do, as this is the only way that we could get the kind of comfortable retirement that we are wishing for.
Overview of Asset Allocation
Asset allocation simply refers to diversification of assets to a different pool of investment accounts. Through this, an investor will minimize the risk of incurring big amount of loss just in case the investment fails. After all, we must not put all our eggs in one basket. If we invest all our funds and assets to one particular investment, whether it is with high-yield stocks or trusted government bonds, we still expose ourselves to greater potential for loss due to possible market fluctuations. This means that the investor who invests in one particular asset type has a bigger risk for losses than those who diversify their funds.
Asset allocation is definitely the best retirement investing method that all of us should follow, especially that this is our hard-earned money that we are talking about.
How to Allocate Assets Properly?
Choosing the right types of assets to invest with is a matter of personal preference and perception of the investors. An investor’s risk tolerance must always be considered when it comes to choosing the types of assets to invest with.
It is really important for the investors to determine their investment goals, and they must determine how much risk they are willing to take and are capable of taking. Maintaining an investment checklist will help determine as to whether an investor is achieving his goals or not. All kinds of investments involve certain risks — it is just a matter of how risky it could get. They say that the riskier the investment is, the better its potential for profitability.
When it comes to deciding on which particular assets to invest, you, as an investor, must ask yourself these questions:
- How much investing knowledge do I have on this particular investment?
- What are my personal financial plans and goals in life?
Each decision to make must always be well thought of.
How to Retire Without Social Security and Live Comfortably?
Though there are no hard and fast rules when it comes to choosing the investment types to invest with, below are some guidelines which most financial experts would recommend to their clients who want to retire comfortably without worrying about social security:
- Risk and reward must be balanced. As mentioned, all investments are risky — and a successful portfolio does just that. Decide how much you want to allocate to a lower-risk, lower-return asset, and how much you are willing to put to a higher risk investment that may provide higher returns.
- Choose and mix wisely. Choose the types of assets that you are familiar with, and always mix the low-risk-low-return and high-risk-high-potential right. Always update your mixture of assets as you age because as you get older, you cannot afford to take higher risks any more.
- Plan for inflation. As inflation is an important factor to consider for retirement planning, it is important to know how to protect yourself from inflation. Thus, when diversifying your funds, certain factors like your current level of capital and age must be considered as they may be affected by inflation. Hence, it is best to plan ahead.
- Go tax-free. Choosing the kind of investments that can give you tax free retirement is also a better option — so it is best to find tax efficient investing options, such as with Roth IRA, which allows tax-free growths.
What about you – have you solely been relying on Social Security for your retirement, or do you have other retirement accounts? Which ones? Leave your comment below!