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The Need for Pre-Retirement Planning

Jun 28, 2008
Everybody has to die. Except of course if you are immortal. This means that when you are young you can handle as many responsibilities and you can do all you want. You can even work and occupy yourself in any employment opportunity. However, there will come a time when you will need to take a break and retire from all this. With age comes physical and sometimes mental deficiency and there will come a time when you would not be able do to everything that you are doing now.

It is thus very important for every person, even the younger ones to conduct a pre-retirement planning. Not everyone is prepared to even think of retirement planning much less to actually plan for their retirement. However, it is important to plan ahead even before you reach the age of retirement to make sure you will be able to live a good life later on.

Many companies offer several lucrative pre-retirement plans for the employee benefit for the future. 401(k) is one such retirement plan which has gained a lot of popularity in recent times. This plan involves the employee signing a form to confirm his acceptance of joining the plan, after which the company deducts a sum of money from his salary every month. This does not affect the employee in the sense that he has to put away some money every month as savings. The company does that on his behalf. This money is available for withdrawal after retirement, when he needs it most.

While opting for any pre-retirement plan, the employee must have some idea of his post-retirement expenditure. You would find a lot of information on pre-retirement planning in most brokerage websites. Check out the Fidelity Investment's retirement planner as it is one of the most beneficial of all the plans. They provide a 5-step guideline which helps an individual to know the amount of money he ought to save.

There are different kinds of tools for planning for the retired life, which gives an idea about how much to save per month based on the current salary. If a person does not have any savings, he has to build up an emergency fund in a taxable account. When he has at least 3 months of living expenses, he can fund his tax-sheltered account to the maximum, and then he can save it into a taxable account. It must be said in this respect that 401k and Roth IRA are tax-sheltered accounts.

Pre-retirement planning also includes tapping the investment options in different areas. Such investments, done prior to retirement provide additional dividends on your saving. To get the maximum safety from such investment options, a combination of stocks, bonds and cash is recommended.

The S&P500 is an ideal investment vehicle for that matter. If you opt to invest in bonds then put your money in 10 to 20 year bond contracts. However, for you cash investments you need to invest in the money market. International insurance companies and mutual funds are also ideal options when investing your retirement money. Any of these options or a combination will give you the best return on your investment.

As is evident pre-retirement planning is mandatory for nearly everyone. Life is uncertain and so is the value of money. Pre-retirement planning can at least secure your own future and that of your loved one. Several companies offer a large variety of pre-retirement planning options, which can apply to almost anyone.
About the Author
Raymond Cheung is a contributing researcher for Retirement Planning Software and is an authority on topics involving pre-retirement planning.
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