Making the Most of your Nest Egg
English: ceramic piggy bank (Photo credit: Wikipedia)
After spending years of working and saving it is the hope that when you retire you will be able to use the newfound leisure time to do many of the things that you never had time for during the busy working years. In today’s economic climate, it can be difficult for most people to really do all the things that they have dreamed off due to time constraints and of course financial reasons.
A busy day at work and the weekly grind of responsibility can see time just evaporate meaning that things you want to do are put on hold. Of course, the ability to do those things requires more than just free time usually. In order to enjoy your retirement you will need a nest egg large enough to ensure the ability to not only continue or maintain your current lifestyle, but hopefully with enough left over to enjoy some of the finer things in life that you passed over during the working years.
Presuming you have managed to tuck away a small percentage of your income each month, the function of compounded interest and time hopefully has helped your direct savings grow into a more substantial amount. With proper management and care, even modest amounts saved on a regular basis over the typical 40 years of work most people have in a lifetime can grow into a respectable amount.
When considering retirement however, the ripples and up and down movement associated with standard investments is not really a comfortable situation to use as supplemental income to your government and/or company pension.
While it does not matter a lot over 40 years if this year is up or down in the stock market while you are saving, it certainly does matter when you begin withdrawing from those savings. If the year you planned the 3 week cruise of a lifetime the market is very low than it will cost you in effect far more than if it were planned for a year when the market is very high. This leaves you in a position of trying to plan your retirement around the foibles of the financial markets.
To avoid this situation, taking a good percentage of your savings and investing into an annuity is an excellent idea for many. The typical retirement check is less than your full time working wage. By looking at what your retirement check is expected to be and setting up an annuity for an amount that will make monthly payments to cover the difference between your retirement check and your standard working wage, you can ensure that your standard of living will not decrease because of having stopped working, and have the flexibility to use your others savings for small luxuries like travel without risking that standard of living in future years.
If you are not familiar with how annuities work, places like No Nonsense Annuities can have excellent explanations of what programs are available that will best fit your individual situation. Taking the unknown out of retirement planning can be a very reassuring thing.
Category: Financial Planning, Retirement
