Cents and Sensibility
Cents and Sensibility
Preparation can lead
to a happy retirementThe happiest retirees are those who feel financially prepared for retirement.
This find, from a study by Harris Interactive, a major polling firm, may not be shocking. After all, you would probably expect that retirees who feel financially prepared would be more content than those who are worried about outliving their income. But you might be surprised by another finding gleaned from the study: Retirement happiness is directly linked to the number of years you've been saving for retirement, rather than your net worth -- although the two factors are certainly related.
Start saving for retirement as early as you can. By putting time on your side, you greatly increase your chances of enjoying your retirement years.
Another question asked by the Harris survey was designed to relate retirees' happiness with the type of investments they had accumulated.
The findings? The happiest retirees' investment portfolios were well diversified. Stocks made up of the bulk of these retirees' holdings, with smaller allocations in fixed-income securities and real estate. Apparently, maintaining a diversified array of investments helped contribute to the respondents' feelings of being well prepared for retirement.
To determine which mix of investments is appropriate for you, consider the following:
>> Your goals. What do you plan to do during retirement? If you envision traveling around the world and maintaining a couple of houses, your investment income needs will be far different than those of your neighbor who plans to stick close to home and do some consulting.>> Your risk tolerance. If you're an aggressive investor, you're willing to accept a greater degree of risk in exchange for potentially higher returns. If you're a conservative investor, you're more inclined to protect your principal at all costs, even if it means sacrificing growth. And if you're a moderate investor, you're somewhere in between. Your mix of investments will be shaped, in part, by your investment personality and risk tolerance.
>> Time horizon. Your proximity to retirement will also help shape your investment mix. If you're many years away from retiring, you may want to invest more aggressively, because you have time to bounce back from short-term volatility. But if you're only a few years away from retirement, you might want to shift some -- but certainly not all -- of your investment dollars into more stable, conservative vehicles.
Guy Steele is a financial planner and head
of the Pali Palms office of Edward Jones. Send
planning and investing questions to him at 970
N. Kalaheo Ave., Suite C-210, Kailua, HI, 96734,
or by email at: gsteele2@pixi.com