For a Secure Retirement: Smart Financial Decisions in Youth

The young and ambitious working class has a strong appetite for spending on travel, designer clothes, gadgets, and even concerts. Their relative freedom from responsibilities, stress experienced at work, and excitement over new things have the biggest influence on their spending habits.

While there is nothing wrong about indulging in life’s luxuries, financial imbalance often results from the failure to forgo current consumption in favor of building a stash for the future. Failure to plan for future financial responsibilities can be disastrous. Below are some things that the young ones must consider to ensure a secure, sustainable, and worry-free retirement.

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Image source: finance.yahoo.com

Cut down on unnecessary spending
People tend to spend on relatively unimportant and fleeting material things that satisfy short-term needs. The want to have the latest model of a phone, the false need to drink expensive coffee at leading coffee shops, and the desire to acquire expensive clothes are all behaviors permitted only by a robust cash flow and by already met basic needs (fixed daily expenses, emergency fund, etc.).

Maximize work benefits
Starting a job at any company is not a guarantee of high earning potential. It is vital to choose a career that has a slightly higher starting salary but still leaves enough room for growth based on skills, competence, and work ethics. It is best to look for a company that offers a retirement plan, health and life insurance, recurrent salary increases, an incentive system, and savings-like employee benefits. These, while not necessarily the key to absolute financial freedom, are the building blocks to a secure future.

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Image source: forbes.com

Responsible marriage
Marriage is a long-term commitment that requires emotional maturity, financial preparedness, and a strong socio-spiritual foundation. Aside from the fact that a divorce is expensive, similar marital catastrophes will also divide financial assets that would create a bump in the long-term financial plan. The young must have a practical and reasonable view of marriage before making the commitment.

Get insurance and start building an investment portfolio
In investing, time is one’s best friend and worst enemy. Starting young is always an advantage because it provides a wide horizon to build wealth and try out high-risk but high-return endeavors. As for insurance, premium prices are at their cheapest for young and healthy individuals. Modern insurance products now also offer living benefits that activate without requiring the occurrence of a life-threatening incident.

Linda O. Foster specializes in estate and retirement planning, offering tax-advantaged low-cost investments and financial planning guidance to her clients. For similar articles, click here.

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For a Secure Retirement: Smart Financial Decisions in Youth

Investing Your Retirement Money In Growth Opportunities

Image source: careersbusiness.co.uk
Image source: careersbusiness.co.uk

Planning for retirement is never easy. It is a long-term process that requires a lot of effort and smart decision-making. Knowledge about the essentials of retirement and investment is a fundamental step to determining which processes and growth opportunities to pursue. While hiring a financial consultant introduces a system in the planning process, the investor should still be apprised of crucial points like finding a passive income, avoiding fad investing, being tax efficient, and thinking about long-term benefits.

Retirement planning is done best during youth and gainful employment. For instance, putting money early on Individual Retirement Accounts (IRAs)—basically a savings account with big tax breaks—gives people tax advantage. Although people under 50 can deposit only to a certain limit per year, the account still carries importance in terms of savings.

Similar to this platform is the 401(k) plan wherein an employee decides how much would be deducted from his or her payroll as contribution to an individual account that his employer creates on his behalf. The employer serves as the primary sponsor and partners with another company to manage the plan.

When people reach retirement, there are more ways to grow their accumulated savings, namely through stocks and bonds. Investing in stocks is as simple as buying shares of a company, making you a co-owner and gaining a portion of its profits. Stocks have high return potential and are beneficial for beating inflation in the long term. However, they also have greater risks in the shorter term.

Image source: forbes.com
Image source: forbes.com

Bonds, meanwhile, are a much more stable investment. Purchasing a bond is like lending money to a reliable borrower. The borrower pays interest on a regular basis and then recoups the principal when the bond matures. The downside includes the risk of the borrower defaulting and less potential returns compared to stock investment. For more convenient options, retirees can park their money in mutual funds, which are stocks- or bonds-based pooled investments managed by professional investment experts.

Linda O. Foster, a Washington-based financial expert, coaches her clients on the best way to reach their financial goals and enhance their retirement plans. For similar articles, subscribe to this blog.

Investing Your Retirement Money In Growth Opportunities

Retirement Planning for Federal Employees

Working for the U.S. government is rewarding even in retirement. With first-class benefits, here’s what every federal retiree needs to know about the Federal Employees Retirement System or FERS:

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The Basic Benefit Plan

A small amount from the paycheck goes to this plan, and the individual’s agency pays for 1 percent annually. To receive retirement benefits from this, an employee must serve for at least five years. Some of the basic benefits also cover an employee’s spouse and children in case of long-term disability and death.

Social Security

Similar to the Basic Benefit Plan, an employee pays for social security every period. But unlike the earlier plan, an employee can take this to the next employer be it private or public. Having social security includes benefits in case of disability and protection for survivors. This is a continuing benefit as it supports disabled, retired, or unemployed individuals.

Thrift Savings Plan

Just like the Basic Benefit Plan, the agency pays 1 percent of the share for each employee. Up to 5 percent of the salary may be assigned for the individual contribution. Even if the person decides to leave federal service, he or she can still gain from this plan. This could be seen as the equivalent for a 401(k) in private companies.

These three are the basic benefits federal employees are entitled to. Federal employees serve the country in countless ways, and they deserve to be compensated by the government even when they’re no longer in service.

Image source: Lipscomblaw.net

Linda O. Foster provides federal employees of all ages invaluable financial advice to help them fulfill their wealth and retirement goals. For more money management insights, subscribe to this blog.

Retirement Planning for Federal Employees