The financial opportunities and threats you face are, to a large degree, dictated by the time you live in. If you have worked all your life to create and build a comfortable retirement for yourself, then you are bound by the prevailing economic realities and conditions. The 21st Century presents some unique challenges as far as retirement is concerned and necessitates some new and often uncomfortable financial planning and decision making. With that as our backdrop, below are some of the most important retirement financial decisions to consider in the first Century of the new millennium.
Which Country Do You Want to Retire In?
Up until fairly recently, the idea of retiring outside your country of birth and life-long residence wasn’t something most retirees considered. Over the last couple of decades, however, as life has gotten increasingly more expensive in developed countries, many retired people have been taking their retirements south to warmer climes.
Whether that is North Americans relocating to Latin American countries like Mexico, Costa Rica and Colombia or Western and Northern Europeans spending some or all of the year in Spain, Portugal or Italy, many retirees are looking for ways to make their money go further by spending their retirements in far less expensive places.
Where you retire can be considered a retirement investments because it has tax implications, cost of groceries and medical care implications, transportation implications and housing implications. What you budget for a comfortable retirement pretty much anywhere in the UK or Canada, for example, is going to go a great deal farther in any of the aforementioned countries.
Inflation
Inflation is one of the most critical elements influencing an investor’s return on investment and buying power. Simply speaking, inflation refers to the purchasing power of your money, which is to say, the amount your money can purchase, or its “buying power.” When prices rise, you lose buying power, which is unavoidable in most of the world’s economies due to the influence of inflation on their economy.
The Consumer Price Index (CPI) gauges the cost of a basket of 175 consumer goods and services, including everything from food to healthcare and housing expenses. The US Bureau of Labor Statistics (BLS) computes an average cost of these things each month to assess how much it has changed from the previous assessment period. This determines how much inflation has occurred and, as a result, provides you the current buying power of your dollar. Inflation eats into retirement savings and what you are able to do with your retirement funds, which is is important to invest for inflation.
Markets Will be Unpredictable for Some Time to Come
What this essentially means is you can’t plan a retirement around timing the market in an era of high levels of uncertainty. Trying to acquire specific equities or make tactical asset allocation changes at the “correct” moment creates significant obstacles for investors. First and foremost, markets are intensely competitive and skilled at information processing.
All of this buying and selling has the result that accessible information, ranging from economic facts to investor preferences, is swiftly absorbed into market pricing. Trying to time the market based on an item in this morning’s newspaper or a financial television segment? By the time an investor can respond to it, that knowledge has already been reflected in pricing.
Conclusion
Retirement is all about using the capital you have at your disposal in the best way possible, stretching it as far as you can while still living the kind of lifestyle you desire. The number of variables involved in achieving that balance seem to grow by the year, making the 21st Century a particularly chaotic, if not interesting time to be alive. Keep the above financial considerations in mind when managing your money leading up to and during your retirement and make your golden years comfortable, pleasant and well-thought-out.
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