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Financial Planning for Retirement

Financial Planning for Retirement. The financial planning process for retirement. Review your savings and investments Estimate your retirement income Calculate your replacement ratio Estimate your expenses Anticipate the effect of inflation Use professionals wisely. Step one.

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Financial Planning for Retirement

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  1. Financial Planning for Retirement

  2. The financial planning process for retirement • Review your savings and investments • Estimate your retirement income • Calculate your replacement ratio • Estimate your expenses • Anticipate the effect of inflation • Use professionals wisely

  3. Step one Review your savings and investments

  4. What factors do you consider when you save or invest your money?

  5. Treasury bill annual returns (1996-2005) 3-month T-bill

  6. Long-term bond annual returns (1996-2005) CitiCorp Corporate Bond Index

  7. Common stock annual returns (1996-2005) S&P 500 Index

  8. Comparison: Annualized rates of return (1996-2005)

  9. Speculative stocks Collectibles Limited partnerships Real estate investment properties Puts andcalls Balanced mutual funds High-grade preferred stock High-grade convertibles High-grade municipal bonds High-grade corporate bonds Money market funds Insured bank accounts Treasurysecurities EE and HH bonds Certificates of deposit Investments: Risk/reward pyramid Futures contracts Increasing Risk / Potential Returns Blue chip stocks Growth mutual funds

  10. Step two Estimate your retirement income • Your City Pension • DROP (statement and DROP calculator) • Social Security • Deferred Compensation (monthly statements) • Savings and investments • Employment

  11. Step three Calculate your replacement ratio A = Gross income in year before retirement • Minus: • Taxes • Work-related expenses • Savings and investments • This is your net pre-retirement income • Add taxes in retirement B= Gross income in first year of retirement Replacement ratio = B / A

  12. Step four Estimate your expenses • How do you spend your money currently? • Which expenses are likely to decrease in retirement? • Which expenses are likely to increase in retirement?

  13. Step five Anticipate the effect of inflation • Which expenses will be most affected by inflation? • How can you use a nest egg to overcome the impact of inflation?

  14. Step six Use professionals wisely • Which type of expert do you need? • How do you locate candidates? • How do you determine their competence? • How much can you expect to pay them?

  15. Click link below to continue... LAFP5 HOUSING2006 2006 0816.ppt

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