Retirement Planning Has More than Buying Pension Plans

When Shakespeare posed the question: 'What is there in a name?' he considered a name as being insignificance. However, when it comes to investment and personal finance, names matters. No wonder fund houses constantly come up with catchy names to lure investors into different plans. Retirement plans and children plans, just to mention a few.
Names have so much influenced investment schemes that investors have come to believe that they only need to invest in pension plans or IRA plans for their retirement. But this is far from the fact that retirement planning is a totally different ballgame.
Is planning for retirement all about paying your IRA contribution and/or buying pension plans?
Certainly no. However, is not surprising to hear people talk of having bought a pension plan for their retirement.
Then, what is retirement planning all about? The heart of retirement planning is building of a corpus that will ensure you enjoy a rather cushy cozy life during retirement. You should start your retirement planning as early as possible, may be from your first day of employment.
The benefits of starting early are twofold: (i) You will take advantage of the power of compounding and (ii) It helps you overcome the vagaries of economic cycles. When Shakespeare posed the question: 'What is there in a name?' he considered a name as being insignificance. However, when it comes to investment and personal finance, names matters. No wonder fund houses constantly come up with catchy names to lure investors into different plans. Retirement plans and children plans, just to mention a few.
Names have so much influenced investment schemes that investors have come to believe that they only need to invest in pension plans or IRA plans for their retirement. But this is far from the fact that retirement planning is a totally different ballgame.
Is planning for retirement all about paying your IRA contribution and/or buying pension plans?
Certainly no. However, is not surprising to hear people talk of having bought a pension plan for their retirement.
Then, what is retirement planning all about? The heart of retirement planning is building of a corpus that will ensure you enjoy a rather cushy cozy life during retirement. You should start your retirement planning as early as possible, may be from your first day of employment.
The benefits of starting early are twofold: (i) You will take advantage of the power of compounding and (ii) It helps you overcome the caprices of economic cycles.
Your First Step
If you are in your late 20's or 30's, the first step is to buy a house. Yes, you got that right. Many critics of the real estate will point out to its lack of liquidity. This is quite a discouragement for any one who wants to earn a living from his investment.
To overcome this challenge, however, there are two things you should do: (i) Never pack all your funds in real estate. It has nothing to do with the "never put all your eggs in one basket" saying but you need to have some some liquid cash for your daily living. (ii) Never rely on fulfilling your immediate needs by cashing out on your house.
Through real estate you will build a capital, which is not only inflation proof, but one which will also adequately cater for your financial requirement during old age.
The matter doesn't end here, though. You can proceed to the next step which involves doing what the mutual fund or insurance companies do with your money while offering you a pension plan - building corpus. On your own or with the aid of a financial planner, you can build your investment corpus. Now, how will you build your retirement investment corpus?

1. Buy Low Risk but Performing Stocks or Mutual Funds: Directly purchase low risk conservative stocks that are performing. Stocks are a good source of constant cash flow, through regular dividends, and their appreciation in value over time will accumulate into a good retirement corpus. However, if you are not a fun of stocks, you can invest in mutual funds.
2. Invest In Gold Bullion: Gold has over time cemented its position as the preferred investment option among many successful investors. As the world move from one standard currency to another, gold investment has maintained its significance as an instrument which can generate returns capable of beating inflation. So, instead of stuffing your closet with gold ornaments, why not just go for the gold bullion?
3. Invest in Quality Debts: These are debts issued by the government, either directly or indirectly. So invest in long-term bonds and fixed deposits which are offered by financial institutions from time to time. This will reduce your overall portfolio risk through portfolio diversification.
4. Invest in New Products: Look out for new investment opportunities which are brought about by changes in economic scenario.

With your retirement corpus built, your retirement planning is 90% complete. The next step will be to deploy the capital. If desired, you can also buy annuity plans, after building that capital.