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	Retirement Funds Planning Guide

To get the decent retirement fund nest egg, start your investment plan early on in career life. You need to chalk out each phase of your life with the crucial investment portfolio. Financial advisors insist of taking a multistage retirement route that chooses a multistage attitude to investing. The first stage involves using the income earned from part time job or a side income after you give up your main career. This extra cash flow means you have to use little income from your main portfolio. This lets you invest aggressively to allow your capital to grow. Even if you start out at 60, you can look forward to another 20-30 years of growth for your capital. Becoming the long-term investor is the key to grow a massive nest egg.

The second stage of retirement involves withdrawing yourself from the active work completely. In this stage you will need to rely more on your portfolio income. But there is no need to invest a lot in bond, because the bull market in bonds that ran for 20 years is coming to an end after providing income as well as capital appreciation to the investors by using the falling yields. With the interest rates going southwards, older and higher yield bonds gained in value. Today the long-term government bonds have a yield of below 5%, thus not giving you much.

All the good financial advisors recommend that the retired should develop a slightly more advanced strategy if they want their money to last them throughout the third or the last stage of the retirement. This is especially important with escalating health care and living costs. They recommend you to allocate your total money to the following portfolio:

- Midcap stocks 10%

- International stocks 10%

- Large cap stocks 40%

- Short-term fixed income 30%

- Small cap stocks 10%

Your retirement nest eggs keep on growing along with the stock market while bonds provide income to meet your living expenses. To help you build up your retirement nest egg, do not delay planning your aggressive retirement funds investment. Many people think about retirement as something that is too far out in the future and do not save enough. But when they find suddenly in the retirement period, they do not know what to do and find themselves stuck. By then it is too late.

With the increasing lifespan of old people, you need to find out how to live longer comfortably with your earnings. This is called longevity risk, which means there is a risk of your money being exhausted before you die. Many people go into retirement without understanding that their portfolio is not big enough to provide money throughout their lifetime. The simple solution is to save more while working and as you near retirement, try to reconcile your budget with your expenses. While deciding on your income requirements post-retirement, take into account market performance and life expectancy. You will realize that you may not be able to withdraw a lot of money from your investment. The maximum you can withdraw is 4.5% each year, assuming a large part of this investment is in stocks to let you use the money throughout your life.

Sensible financial advice requires you to invest in both short-term and long-term growth. One of the best investment strategies requires you to invest at least 5 years of living expenses in high quality bonds, with few of them maturing each year. E.g. you can buy some bonds that mature in a year while the others mature in 2 years and the rest in successive years. This ensures you get income each year and get access to principle as each bond or the group of bonds matures. You can then sell some stocks to finance another year’s worth of bonds that mature in another 5 years. If the value of your portfolio goes down, do not sell the stocks and if you have made profit in specific year, you can invest for long period ahead. Keep the remaining portfolio invested entirely in stocks with high growth potential. The second method is to purchase an immediate annuity with handsome payout to recover your expenses of health care insurance, taxes and living expenses. But it is advisable that you wait till you reach the 2nd or 3rd stage of retirement before opting for this method, since payout is more as you grow older.

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