5 KEY FACTORS THAT MAIGHT AFFECT YOUR RETIEMENT SECURITY

Are you about or thinking of retiring? Well here are 5 factors that will affect your retirement life.

1. Inflation

Over the years inflation has been occurring and most people including retirees and those who are not in the retirement age don’t know the effects of inflation. And today I want you to put inflation as the number one concern because this is unavoidable. Inflation is a significant risk to retirement security, because the cost of goods and services rises and you will need more savings to fund your daily living despite most retirees don’t have active source of income. It is a good idea to test your finances by running scenarios at different rates of inflation, this will help you to gain total control over your money and make better decisions about your future.

2. Rising interest rates

With rates on the rise there are serious effects for both individual investors and pension administrators.

For individual investors – The rising rates brings good news and bad news to individual investors. The bad news is that the borrowing costs will be high/more. Higher borrowing costs can lower the value of owned assets like home. The good news for retirees is that the rising rates mean that it is easier to generate income off of savings, however there is strong evidence that very few people understand this correlation.

With low inflation we all forget to use low interest rates. Over the past years low rates has created favourable conditions for borrowers, businesses, and investors. However, the low rates have made it hard for retirees who were seeking predictable income and growth from relatively safe investment like bonds. The low rates have also changed how the money in pensions will be managed.

For pensions – In the long run the higher rates will help pension address shortfalls in their funding ratios meaning that pensions should become more solvent.

What to do with regards to higher rates.

1. What your borrowing costs.

2. Learn about bonds, keep an eye on interest rates and consider your investment strategy carefully.

3. Consider how you want to balance the risks and rewards of being invested in the stock markets. The rising returns on fixed-income investments offers a bucket strategy that can be a good solution.

4. If you have a pension it is always a good idea to ask your administrator about the risk to your future payments.

5. Evaluate the role of home equity in your retirement plan and perhaps scale back your long term rate of appreciation.

3. Public debt

What is public debt?

Public debt – Is the financial liabilities of the government.

b) Is the total amount of money that is owed to the public by the government to meet the development funds.

c) All financial obligations attendant to loans raised or guaranteed aby the government.

d) Are securities issued by the government

Over the past years public debt has risen across the world. The good news is that the unique combination of higher prices, higher wages and economic growth boosted projections for the tax revenues needed to make good on debt obligations. As a result many countries saw their debt to GDP ratio decline.

The bad news! Is that, we still have a lot of debt, and the individual investors who are still working and the retirees worry that the higher levels of public debt will result in reduced benefits down the road.

What do many people think about public debt?

Many retirees worry that public debt will reduce social security fund. But regardless of what will happen it is more important to create and maintain your own comprehensive retirement plan, paying close attention to your own longevity and to your retirement income sources.

4. Demographics

Due to the increase in life expectancies and a reduction in the birth rate, developed countries now have more people who are older and no longer working. This translates to a crisis for public benefits which are built on a simple premise you need more people paying into the system than there are people taking benefits out.

What think about demographics

Understand your own life expectancy and how that impacts your retirement savings need.

Why should a young population be considered?

1. It pays into the system

2. It provides needed products and services

5. Unrealistic expectations and understanding of the risks

Most individual investors underestimate what is needed for a secure retirement. Most people don’t know how long retirement will last or how much money will be required to fund retirement. They also have unrealistic expectation about investment returns.

Having a financial plan can help you plan for future unknowns and gain confidence that you can create a plan for financial security no matter what happens. Having a financial plan will help you to

1. Run investment with different

• Rates of return on investments

• Longevity ages

• Retirement dates

• Inflation values

2. Discover how much you need in savings for a secure retirement under different conditions

3. Explore other risks by

• Covering a long term care needed

• Guaranteeing the implications of income against relying on stock returns