It’s never too early to start planning for retirement. Figuring out how to define your retirement goals and how to achieve a sustainable, fulfilling retirement is no small task.  It begins with identifying all sources of income in retirement, identifying a budget for expenses, and managing the distribution timeline of one’s assets to balance risk and reward within your portfolio. Building up your nest egg early creates a larger pool of money to pull from in retirement but figuring out when and how you will need to access those dollars is integral to understanding how much risk is appropriate for each segment of your portfolio.  The closer we get to relying on these dollars to pay the bills in retirement, the more we need to reduce market volatility.  You may have heard the old adage, “don’t gamble with the rent money”.

Accumulating Funds for Retirement

There are many ways for individuals to save for retirement. One popular method is investing in target date funds. This type of fund helps coordinate investment risk with the timeline for utilization of those particular funds. An individual begins by identifying the time frame in which they anticipate needing to rely on the investment. As we progress towards the “target date”, the investments made by the fund change from higher risk to more stable ones. The TSP refers to their target date funds as “Lifecycle Funds” and include a year in the name which helps indicate when these funds will reach their most conservative allocation so as to avoid market volatility – the “target date”.

Just like any investment, target date funds are not 100% risk-free (even after passing the target date). A life-cycle fund aims to have a minimal risk factor around the target date by maintaining a broadly diversified portfolio that uses less and less equity positions as the target date nears. As with any stock market investment, there’s always a chance that a target date fund can lose money but it helps automate rebalancing the portfolio for investors.

When to Be Aggressive or Conservative With a Retirement Fund

When deciding to go with a target date fund, selecting a target date is key.  When opting to be aggressive (by choosing a target date further out in the future), having the time to wait out any market drops will make a big difference which is why they are designed for those with a longer timeline – because there’s time to recover losses.  As the need to distribute the particular funds in question approaches, protecting them from market downturns can be beneficial.  Monthly bills and budgets don’t commonly wait for the market to recover before they’re due. 

Enjoy the Future by Planning Ahead

Retirement planning means planning now for the future. With proper planning, an individual can live out the later part of life without worrying about having enough money. Set realistic goals now regarding how much cash flow you’ll need to live comfortably. Since everyone’s retirement lifestyle is different, choose a path that best suits your needs. Make investment goals a priority and select the retirement plan that meets that expectation. Saving and investing early in life allows more time for a retirement account to grow.

The Walker Capital Preservation Group takes great pride in helping businesses, families, and federal employees navigate the process of planning for retirement. Our founder, Tom Walker, has a passion for helping others and has written many well-acclaimed articles to aid people with making informed decisions regarding retirement income goals and the necessary steps to make it all happen. The Walker Capital Team has a knowledgeable staff that can assist with retirement planning, benefits coordination, tax planning, and insurance planning to help prepare you for the future. 

It’s Never Too Early to Begin Saving for Tomorrow

The future comes around faster than most of us are prepared to handle. Retirement planning is often put on the back burner when it should be a priority now. With proper saving and investing, anyone can have a worry-free retirement.