There are several considerations that apply for retirement planning if you break it down by the amount of time you have left until you retire.
If you have at least ten years to go until retiring, you still have the advantage of time on your side. With more than ten years to invest, you might be able to afford to take on a little bit more risk with your investments. While equities have an inherent risk of losing money, they also have a history of providing significant returns over a long period of time. Remember, past performance is no guarantee of future results.
Probably the biggest advantage of getting an early start is the benefit of compounding earnings. Based on the investments in your retirement portfolio, the money you put in has the potential to earn more money for you – whether through interest payments, dividends, or other means of growth. In many cases, those earnings can be reinvested, further enhancing the total value of your savings.
If your retirement is less than ten years away, it’s time to start making subtle adjustments to your investment mix. Hopefully, you are taking a look at how your investments are allocated and making sure they appropriately match your risk tolerance, investment objectives and time horizon. Because you have less time to work with, you still want to have some investments that offer growth, and also look at preservation of principal through fixed income alternatives such as bonds, which may provide a little more stability in your portfolio and help reduce your overall risk.
Finally, when ready to retire, you will be looking to maintain income from your investments and likely begin taking distributions from them to pay for your day-to-day expenses. A thorough review of your investments will help you clearly see how much you have saved.
Financial preparation for retirement is different for every individual. Take time now to assess your own situation and see what you can do to make sure you’re ready when it’s time for you to retire.
This article was written by Wells Fargo Advisors and provided courtesy of
Christina A. Karas Vice President-Investment Officer in Boca Raton at 561-394-7561
Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE
Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company.