In this day and age, nobody can afford to go into retirement without any financial plan to replace their current income. In the past, it was enough to rely on social security pension. Right now, it’s just not possible. So when do you plan for early retirement and how do you do it?
Financial planners like to say you should start planning for retirement as soon as you are earning money, which could be in your late teens or early twenties. There is a lot of wisdom in this. It would be easier to save for a million dollars when you are young then when you are in your forties. That said, save as much money as you can. Now, not later.
Useful info from Take 65 that the first thing you need to save up for is your emergency cash fund, which is equivalent to six months of your monthly salary. You don’t touch this money. As the name implies, you only use it during emergencies.
Next, save up for your financial nest egg. Your financial best egg is a combination of different investment instruments that vary in interest rates and risk. Very briefly, financial ran the whole gamut from the safest such as government treasury bills and bonds to high-risk investments like penny stocks. In general, the higher the interest rate, the riskier it is. In other words, you could end up losing a lot of money but then again, you could also benefit from huge financial rewards.
In this article, we are not going to talk in detail about the different investments you can put your money in. That’s something you should do by yourself especially if you are going to build your retirement fund DIY. As a rule of thumb, though, you should invest in wide different types of investment to even the risk maximize earnings at the same time.
If you work with a financial planner, the exact percentages of high-risk versus low-risk investments are already pre-determined based on your appetite risk or investment personality. Obviously, if you are a high-risk taker, more of your money will be invested in the riskier yet more profitable investments. Whether you belong to the high rollers is not something you decide for yourself.