Retirement Planning Assignment Example | Topics and Well Written Essays - 750 words

Retirement Planning - Assignment ExampleMy plan is to work in the private industry for 40 eld to then retire. Retirement is very important because it represents the golden years of a persons life sentence. People expect to enjoy seclusion with their love ones. In order to truly enjoy solitude it is important to be financially independent. I allow for graduate at 25 years of age. The average profits I expect to earn during my career will be approximately $50,000. A retirement ready reckoner on the CNN Money website was used to estimate my retirement goal. My retirement goal is to save $500,000. My expected retirement age is 65 years of age. I estimated my life expectance at 78 years since that is the average life expectancy in the United States (CultureGrams, 2012). My expected pension income and social security income are $1000 each. Based on these variables the retirement calculator gave the following output. Your Results You will need a total of $1.7 million ($496,418 in toda ys dollars) to retire at 65 years old (Cnn, 2012). The second tool available at the CNN website was an asset allocation display. I stated that I needed the money in 20+ years. I selected that I was willing to take a reasonable nub of risk of infection. I stated I could not afford to miss my target and during market sell-offs I see an opportunity to buy more stock. The result of the calculator is illustrated below Suggested allocation (Cnn, 2012). The suggested allocation provided by the CNN calculator provides a list of potential allocation of assets. My plan to save $500,000 by retirement age tooshie be achieved if I implement a proactive saving strategy that uses a wide arrangement of investment and retirement tools. Three retirement instrumental roles that I plan of use as part of my diversified portfolio are IRA, Roth IRA, and 401k plans. An IRA is a retirement savings account that allows taxpayer to save money without paying taxes for the income determined in the IRA acco unt. Money placed in an IRA account accumulates interests every year. The money cannot be taken out of the IRA account until retirement age reaches. Bottom of Form A Roth IRA is, An individual retirement plan that bears many similarities to the traditional IRA, butcontributions are not tax deductible and qualified distributions are tax free (Investopedia, 2012). A 401k plan is a company sponsored retirement plan that allows individuals to set aside tax-deferred income towards retirement. There are new(prenominal) financial instruments that can be used to save money towards retirement. One of the most popular forms of investments is common stocks. Common stocks give investors ownership in a publicly traded company. The investors that keep stocks for a long time earn dividends from common stock as well as a capital gain erstwhile the investment is sold. The safest type of stock that an investor can choose is blue chip stocks. A blue chip stock is a stock issued by a well known compa ny with an established record of making money and paying dividends (Teweles, Bradley, Teweles, 1992). An example of a blue chip stock is Microsoft. Due to the risk associated with penny stocks and foreign stocks I will stay away from these two types of stocks in order to minimize the risk of the portfolio. Another good investment instrument that is often chosen by investors is corporate binds. Corporate bonds pay the investor the coupon rate on a yearly or biannual basis. The principal of the bond is paid at maturity age. Most bonds are of $1000 denominations. A portion of my retirement