A Retirement Planning Primer

Does your retirement seem years and years away? While it may appear so, you owe it to yourself to look ahead and begin thinking about a period in your life that may account for 20 or more years. Granted, time may be on your side. However, if you ask 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 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? Therefore, the key is to seek retirement savings avenues that have the best chance of reducing the long-term effects of inflation.

Taxation. The impact of taxes is one of the few constants in developing a retirement savings plan. Your present income level, tax bracket, and the types of tax-advantaged retirement vehicles available can all play an integral part in developing a plan that considers your present and future tax situation. It’s important to maximize pre-tax contributions to employer-sponsored plans or an IRA (Individual Retirement Account) to take advantage of the tax-deferred nature inherent to such retirement tools.

Diversification. For many individuals, deciding how to invest can be an unsettling experience. Most people know it is not prudent to invest everything in a single security, even if it’s 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 and risk tolerance. This holds true for investments within your retirement plan, as well as those assets that you have invested outside your retirement plan.

Discipline. One of the key ingredients of a successful retirement plan is having 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. Also, it is important to have discipline with periodically reviewing and assessing your investments to ensure that it remains consistent with your current objectives and risk preference.

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 to meet your long-term retirement income goals. Therefore, it is important to save and invest, in addition to making retirement plan contributions to be prepared for a potential shortfall.

The earlier you recognize the various factors that will impact 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.

Copyright © 2015 Liberty Publishing, Inc. All rights reserved. Distributed by Financial Media Exchange.

 The information and general descriptions found in this article are designed to help you understand some of the factors you should generally consider when evaluating the appropriateness of any strategy or investment within your retirement plan. Any description included is for informational and educational purposes and for your independent consideration only; it is not to be regarded or viewed as advice or as a suggestion to take (or refrain from taking) any particular action. By providing this information, we assume that you can evaluate this information and the general descriptions found here to exercise your independent judgment. Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting or tax advice services. If legal, accounting, or tax advice services are required, you should seek the services of a competent professional.

 Investment products that are available in your retirement plan are not a bank deposit, an obligation of, nor are guaranteed by Banco Popular de Puerto Rico.  They are subject to market risks, including the possible loss of principal.  Please request a prospectus and read it carefully before investing.  The suggestions and recommendations included in this article are educational information, and we cannot guarantee the performance of any products that may be purchased in accordance with such recommendations. Past results are no guarantee for future performance.