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A Complete Guide to Retirement and Investing Planning

Updated: Jan 25


a complete guide to retirement and investing

Understanding Your Retirement Needs in this guide to retirement


1. Calculate Your Retirement Number


  • Estimate annual retirement expenses (typically 70-80% of current income)

  • Account for inflation (historically 2-3% annually)

  • Consider life expectancy and retirement age

  • Use the "4% Rule" as a starting point:

    • Retirement savings needed = Annual expenses × 25

    • Example: $40,000/year × 25 = $1 million needed


2. Start Early: The Power of Compound Interest


Regular investments grow exponentially over time through compound interest. Example growth of $10,000 annual investment:

  • After 10 years: ~$132,000 (7% return)

  • After 20 years: ~$406,000

  • After 30 years: ~$944,000


Investment Strategy


1. Build a Diversified Portfolio


Asset Allocation Based on Age


  • In your 20s-30s: 80-90% stocks, 10-20% bonds

  • In your 40s-50s: 70-80% stocks, 20-30% bonds

  • In your 60s+: 50-60% stocks, 40-50% bonds


Investment Vehicles


  1. Stocks/Equities

    • Individual stocks

    • Index funds (S&P 500, Total Market)

    • International stocks for geographical diversity

  2. Bonds

    • Government bonds

    • Corporate bonds

    • Municipal bonds (tax advantages)

  3. Alternative Investments

    • Real Estate Investment Trusts (REITs)

    • Commodities

    • Cryptocurrency (limited portion)


2. Retirement Accounts


Tax-Advantaged Accounts


  1. 401(k)s

    • Contribute enough to get full employer match

    • 2024 contribution limit: $23,000

    • Additional $7,500 catch-up contribution if 50+


  2. IRAs

    • Traditional IRA: Tax-deductible contributions

    • Roth IRA: Tax-free withdrawals in retirement

    • 2024 contribution limit: $7,000

    • Additional $1,000 catch-up contribution if 50+


Action Steps


1. Immediate Actions

  • Calculate your retirement number

  • Review current savings and investments

  • Set up automatic contributions

  • Check employer retirement benefits


2. Regular Maintenance


  • Rebalance portfolio annually

  • Review asset allocation every 3-5 years

  • Increase contributions with salary raises

  • Update beneficiary designations


3. Risk Management


  • Emergency fund: 3-6 months of expenses

  • Adequate life insurance coverage

  • Long-term disability insurance

  • Estate planning documents

    • Trust

    • Power of attorney

    • Medical care directive (a.k.a. DNR) do-not-resuscitate order to instruct medical professionals not to perform CPR or other emergency procedures)

    • Tax implications

    • Enlist a professionals e.g. financial advisor, accountant, attorney

       

Common Mistakes to Avoid


  1. Starting too late

  2. Not maximizing employer match

  3. Investing too conservatively when young

  4. Failing to diversify 

  5. Trying to time the market

  6. Withdrawing retirement funds early

  7. Neglecting tax planning

  8. Not adjusting for inflation


Resources for Further Learning


  • IRS website for tax rules and limits

  • Financial advisor consultation

  • Investment education websites

  • Retirement calculators


Remember: This is a general guide to retirement. Consider consulting with a financial advisor for personalized advice based on your specific situation, goals, and risk tolerance.


Calculators and additional resources


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