Trying to make ends meet, whilst saving for retirement, sometimes seems impossible to accomplish. Given the current state of the economy, it seems that people are far more concerned with simply making it through in one piece, rather than saving for retirement. However, despite the current global recession, people are still hard at work, putting money away for that one day when they finally do retire. Financial planning is still an important aspect of personal finance. Whilst times may seem tough, it’s important to note that all recessions are immediately followed by periods of growth. It happened after the Great Depression, the stock market crash of 1987 and it will happen again. Whilst the government is planning to phase out the default retirement age of 65, from April 2011 onwards, most look forward to the day when they can finally settle down and relax. Whilst the state provides the basic pension, most understand that it simply won’t be enough. Thus, the importance of financial planning has perhaps never been more obvious. One must save for retirement and there’s no better time to get started like the present.
Start Early & Determine Your Risk Tolerance
It’s essential to start your personal, or company pension plan, as soon as possible. In essence, the earlier you start, the better. Most pension plans emphasize that individuals take the time to assess their own risk tolerance, or more importantly, to come up with their long-term plan. The emphasis is on putting money in the investment vehicle that matches an individual’s risk tolerance so as to ensure that individual isn’t withdrawing funds too soon. This occurs when they’re uncomfortable with the investment they’ve chosen. However, the first step is to start early and determine your risk tolerance. The next step is to put together a long-term plan for growth. So, what’s next?
Enact a Periodic Withdrawal Plan
It’s not important how much one contributes to their personal pension plan. What is important is that one get started on that plan. A good rule of thumb is to use a periodic withdrawal plan where funds are withdrawn from an ISA (individual’s savings account). Whether it’s as little as $10 to $20 a week, every little bit counts. Individuals use the periodic withdrawal plan so that they don’t have to manually contribute to their personal pension plans. Some UK employers will provide the necessary information on their own plans, if they offer them.
The benefit of personal financial planning is that it empowers individuals to take charge of their own retirement planning. The emphasis is on starting as early as possible, whilst working with a plan that provides a roadmap to retirement. A number of financial planners call upon three principles of personal finance. One is to eliminate personal debt. The second is to save for those emergencies and the third is to save for retirement. Start your personal pension plan today.
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