Cuapa Asset Management

Some have worked most of their lives without thinking about retirement. Many have expected to draw on social security and maybe even a private company pension plan if they are lucky enough to work for a company that has one.

But is this enough to retire with? Inflation has severely reduced the value of social security payouts which have been under-indexed to the rising CPI, and the same can be said about private pensions. In some cases, businesses have gone bankrupt and pensioners won’t even be able to rely on a devalued payout from the pension when they retire because it no longer exists.

So what’s a soon-to-be retiree to do? Here are a few tips for people who find their selves investing late for retirement.

-Don’t overcompensate. If you take too much out of your budget to invest in your retirement portfolio, you may have to pay fees to quickly withdraw from it again due to the lack of enough expendable current income.

-Don’t put your money all in one place. The old adage, “Don’t put all your eggs in one basket,” is commonly known but equally commonly ignored. If you put everything in the “next best thing,” you can wipe out all of your savings quickly and end up having to return work.

-Take advantage of tax sheltered plans. Individual Retirement Accounts allow for tax advantages to individuals who use them. Don’t forget to consider the advantages of the two main account types: A Roth IRA can be used to invest with no tax break now, but no tax when cashed out in the future, while a Traditional IRA allows tax deductibility from the current year’s income with the money being taxed when withdrawn in the future.

What to Buy

An investment advisor may be the best person to advise you on what to actually put into your portfolio, but here are a few suggestions.

-Stocks. Stocks can grow both on equity or a dividend basis, or both. The main purpose of getting stocks is that they represent a board of businessmen fighting to improve the value of your holdings, provided you buy into a good company. These come with risk, so don’t hold your entire portfolio in stocks.

-Bonds. Bonds are guaranteed when purchased from the right issuer, but they may offer low returns, particularly due to the low interest rates set by central banks right now. Make sure to buy them in low inflation currencies like the Swiss Franc or the Japanese Yen, as the US dollar may depreciate faster than the interest accumulates on the bond.

-Precious metals. Precious metals can act as a hedge to inflation and are easily liquidated. Many banks can sell you these, but if not, check out www.kitco.com to mail order it.

Hopefully you now feel more confident about your retirement. With a few sacrifices now, you will be as well-off later as if you had started planning for retirement at age twenty.