We all like to think about retirement as the years when we
can afford to stop working and start traveling, playing golf,
relaxing, or spending more time with our loved ones. While you may be dreaming
about your golden years, how much thought have you given the funds that you
will need to make your retirement dreams a reality? The truth is, those who
commit to a disciplined investment strategy today may have a better chance at
achieving the retirement of their dreams.
This chart shows the importance of establishing a systematic
investment plan, and how starting an investment
plan at different life stages can accumulate varying amounts upon reaching age
65. The chart shows three, important factors that can influence retirement
• The Power of Compounding. Compounding,
simply put, is when an investment generates earnings on reinvested earnings.
When this theory is utilized in retirement accounts, where funds may be
accumulated for years or even decades, it can be pretty powerful. The longer
money is left in the account, the faster it begins to grow, which is a clear
indication of the importance of starting a
retirement fund as early as possible.
• Dollar-Cost Averaging. By utilizing a
systematic investing plan, which includes investing on a regular basis,
investors may take advantage of dollar-cost averaging. With dollar-cost
averaging, investors buy more shares when the price of an investment has
declined and fewer shares when the price has risen. Over time, the cost of the overall investment may be lower and investment risk may be reduced by not
investing substantial amounts at the wrong time. Keep in mind that dollar-cost
averaging does not assure a profit or protect against a loss in declining
markets, and before embracing the dollar-cost averaging strategy, investors
should consider their ability to continue investing during periods of falling
• Choosing the Right Mix.
Investors with a longer investment time horizon may take advantage of more
growth-oriented investments, which
typically offer a higher average return based on their increased risk. By
selecting investments that have the potential to achieve higher than average
returns, investors can possibly increase their potential to accumulate greater
assets for retirement. Of course, every investor needs to carefully evaluate
their tolerance for risk, ability to invest, and investment time horizon
before selecting their specific investments.
Planning for a successful
retirement can be the key to helping ensure that your retirement goals become
a reality. For more information on how you can begin to plan for the
retirement of your dreams, contact your Financial Advisor