Tag Archives: nest egg

Reaching Requirement Goals

Reaching Your Retirement Goal Requires Commitment

When it comes to investing, retirement planning, or tracking our markets, we rely on the media to get our information. It may be from the newspaper, television, magazines, the Internet, or our cell phones. Either way, we learn a lot about what to do and what not to do about investing from the media. We must remember that the information can work for us or against us depending on how we apply it. Now, how does this relate to reaching our financial goals? Knowing some of the key elements that help reach financial goals is critical. The value of time, the commitment to save, and understanding what you invest in are a few of these critical elements.

Understanding these elements will help the everyday person read through some of the information from the media and apply it to their situation. For example, many investors may spend countless hours researching a product or investment but not consider the value of time in an investment. The future value of an investment, compounding at a given return, is powerful, but factoring in the concept of time can make a huge difference in one’s nest egg. In other words, if one were to start investing the same dollar amount every year at the age of 21 rather than 35, the value of that investment may differ by the hundreds. Most of the media information we see does not account for the value of time for investing — only the investment and what trend is in place NOW!

Saving for the future is dependent on so many factors. Many of us forget that understanding our behaviors is important as it applies to our finances. The commitment of saving is the first step and is usually the hardest. For some of us, taking the actions to execute a commitment is challenging and requires others to help. A great example of this is when employers automatically sign up their employees to participate in their retirement plan. Studies have shown that when the employers take this approach they had much higher participation even when employees were given the options to opt-out. (Source: “Behavioral Economics” by Sendhil Mullainathan, MIT & NBER and Richard Thaler, University of Chicago and NBER).  Planning and committing to saving can be a complex decision, many of us avoid making this decision and committing to it.

Once we have committed to saving, we must consider our investment strategies. It varies among several factors. These factors are risk tolerance, time horizon, and financial needs for retirement. For this reason, I highly suggest using a financial professional to provide recommendations for investments that are appropriate. In addition, it is imperative to consistently review your accounts and objectives. Although we may have a plan in place, our world, economy and financial situations change, so we must be educated and prepared to make adjustments when needed.

Investing advice

Investors Can’t Avoid Risk, But They Can Minimize It With Education

For most investors, retirement plans took a turn for the worse, specifically in the last few years. They are faced with more challenges and require more discipline when planning for their “nest egg.” Many can remember when they were able to focus on basic techniques such as saving and investing to earn a conservative return. Today, this is not the case.

There are many more factors when investing that are out of our control. There are more influences from our government, politics, financial institutions and international economies. There has always been and will always be a mixture of economics and politics that will affect our economy. However, in the last few years we have seen much more government involvement than usual. Monetary and fiscal policy, which for years have helped to navigate our economy, now play an even larger role. What does this mean for the individual investor? A lot. This requires more responsibility, planning and action from investors.

Investors’ risk today is substantial. We can, however, reduce some of our risk by keeping involved and planning appropriately for our retirement needs. Many of today’s risks include inflation, interest rates, the economy, markets, and now real estate. To reduce risk we must understand it. We then can begin to develop techniques and strategies to limit our risks. I would first recommend that you to seek the advice of a financial planner and have active communication with him or her regarding your goals and needs. I would like to point out that active communication is critical, so as an investor you can evaluate all of your financial decisions objectively throughout your planning process.

Recently, many investors have been tested on their strategies and techniques for investment planning. Hopefully, they can benefit from the downturn they have experienced in the last couple of years and learn from it. If investors pay extra attention and educate themselves about the risks of today’s market, they can prepare for future economic changes.

We will all certainly face new and unknown challenges in our future; systematic risk is unavoidable. With the right counsel and guidance, one can plan accordingly to avoid big mistakes in investing. These mistakes can be controlled, not by the performance of the investments, but by investor behavior.

Michael CoachellEditor’s note: This month’s personal finance column was written by Michael Cochell, associate vice president at Jacob Gold & Associates Inc. Jacob Gold will return next month.