Have you heard about some cities and towns in the United States that are facing bankruptcy? In addition to spending more than they take in (gee, wonder why that sounds familiar) they have another common problem; the planners are using numbers from decades past when you could legitimately count on a 6% to 8% return on investments. Guess what? That doesn’t work anymore; in fact, it hasn’t for a long time. Returns vary, but calculating higher than average returns year after year guarantees the retirement fund in question will be terribly underfunded. Can you say “unfunded liability”?
I bring this up because I have been looking at ways to calculate how much you will need when you retire, and people some make the same mistake of unrealistic returns on investments. I will not offer any specific rules of thumb for calculating how much you’ll need for retirement, but I will offer some points to consider for retirement.
- Start early. If you haven’t started early, start now. If necessary start small, but at least start.
- Calculate return based on realistic annual Investment averages.
- Diversify your investments.
- Re-think your investment strategy annually.
- Think long term.
- Have a reputable licensed financial advisor
UKFCU offers professional financial consulations, see our investment page for more information.