5 Things I Learned About Retirement
For the past two years, I have read more about personal finance than I've ever read my whole life. Before that, I've been too busy in my career that I didn't have time to sit down and read about other things (but that's a different story). Then two years ago, I started reading about personal finance, specifically about retirement. I've learned quite a lot from my readings (both online and through books, magazines, etc., etc.) about retirement. Let me share some of them with you.
This one I learned 10 years too late. I've learned that it's never too early to start saving or thinking about your retirement. It is less 'painful' (not to mention easier on the budget) if you start saving early for your retirement. People who start preparing for retirement in the late stage of their life will find it difficult to maintain their standard of living once they retire. Or worse, they might never get to retire at all because they still have to work, even if they are already old, just to live.
Do Not Rely on Government Retirement Funds
Lots of countries all over the world have government-backed retirement or pension plans for their citizens. There's nothing really wrong with this. In my country, this is especially advantageous to the working class because for every peso you invest in the plan, your employer will invest two pesos! And then when you retire, you get all the benefits. Not bad. BUT relying on these plans may not be enough because the amount you get when you retire may not be that big and may not even be enough to finance your needs after retirement. The lesson here? Have your own pension plan that you can invest in a private institution and you can personally monitor. You will not only control your money, but you can also ensure that what you will have upon your retirement is enough for you.
Save, Save, Save
Unless you are the child of a billionaire, a millionaire or one of the richest people in the world or you've won the lottery (but even these are not guarantees of a good life after retirement), the only way that you can be sure that you will have enough money when you retire is to save, save and save. I've often read this - pay yourself first! This means that saving money should always be a top priority, first for emergency purposes and then for retirement purposes.
Invest, Invest, Invest
With prices and the cost of living going up, your savings right now will not have the same value after you retire. If you just put your money in a low-risk, low return investment, chances are you will finance your whole retirement fund. But if you put your savings in high return investments, chances are you will grow your savings at a rate higher than the inflation rate. Now that's true value for your savings!
Whether you will go for a low return or a high return investment, just make sure that you invest carefully and wisely. Nothing can shot your retirement plans to hell better than a poor investment decision that will rob you of all your hard-earned money. The rule of thumb? Diversify. Another rule of thumb? Be wary of high return investments that do not seem real. If your gut tells you its a scam, steer clear from it. It is better to be safe than sorry.
Plan Your Retirement
Ensuring that you will have enough money when you retire is not a hit-and-miss thing. You cannot just put aside your money and hope you will save enough for the future. You have to sit down (with your spouse and/or your children) and plan carefully how much you will need when you retire. Only then can you start to draw up your savings plan for your retirement. Otherwise, you will just be in the dark on what you really need when your retire.
Lastly, and here's the really ironic part, people (especially in my country) do not really think about retirement unless they're nearing that age. I've seen this happen and it really saddens me to see old people still working because they can't afford to retire. I hope that through the things I learned about retirement, I will be able to prepare for my retirement and enjoy my life (and freedom?!?!?!) to the fullest when I retire.
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