Contributing to your retirement account is an important part of personal finance responsibility. Starting a retirement account is not as simple as starting a savings or current account, as you have to choose the investments you make on the account. Choosing investments is the most challenging part of opening a retirement account. However, most banks, for instance,Newcastle Permanent, offer advice to their customers on the right investments to make. On retirement, an individual loses his ability to earn salaries or wages. Irrespective of the channel you have used to build up savings, whether property investment, bank savings, superannuation, equity in your home or something else, you will need to channel the cash into an income stream that is secure, convenient and tax-effective.
Insurance companies and financial organisations offer retirement investments. You can visit these organisations directly or use a financial planner to get to them. To set up a retirement investment account, you need financial advice especially on matters like tax. Let’s take a look at the factors to consider when setting up your investment account.
The investment you choose should match your specific needs
Every working individual’s retirement investment should be unique. This is because of three variables, which are the time that is remaining until retirement, the amount of money you need when you retire and the amount of money you have already saved. According to financial planners, one should start with a “magic number” – the amount of money you want to have once you retire. Take into account all other forms of investments, like real estate and pension, and subtract the expenses you will incur each month after you retire. After doing the math, you will have a concrete figure and you can start investing in your retirement account.
In most cases, you will get a deficit (a negative figure). This shows the expenses will be higher than the income. If the monthly deficit was about $2,000, annualise this to get $24,000 then multiply by 25 to get an approximate figure of what you will need after retiring. This will be $600,000.This figure determines how aggressive the investment should be.
Take enough risks to accomplish your goals
The retirement account shouldn’t be a place to test your risk limits. The amount of risks you take should assist you toreach the financial targets you have set. In this case, you should not be driven by emotions. When driven by emotions, you are likely to transfer your account to low-risk bonds and fail to make money or be overconfident and ignore risks that may lead to losing money.
Consider investing in atarget-date fund
Maintaining a retirement investment portfolio you have created yourself can be a daunting task. You need target-date fund, which is a pre-constructed account with a date attached to it. The date is usually your retirement date. The length of the target date will determine the aggressiveness of the investment. Target date funds tend to be more conservative as they get near to the retirement period.
Seek advice and do not worry if your investments are not as you plan
You can get variable rate home loans from Newcastle Permanent that allow you to dip your toe in the property investment waters. However, it’s vital to note that managing a retirement account is not as cheap as getting a loan. If your investments are not perfect, you should not worry but instead seek help from wealth advisers or financial planners.
As a bonus tip, you should always consider diversifying your portfolio by placing your funds in different investments. The interest rate offered by the bank or insurance company is key to your success and should be 8.5 percent or more. It is thus important to ask your financial planner some questions before making any decisions.
