Page 171 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes 9.4.4 Current Savings and Investments

Also consider what current savings and investments you have. If you already have a sizable
investment portfolio, it may be sufficient to cover your retirement needs all by itself. If you
have yet to begin saving for your retirement or are coming into the retirement planning game
late, you will need to compensate for your lack of current savings with greater ongoing
contributions.

Notes If you do have current savings and investments, be sure to include only the portion
you expect to have left over by the time you have reached retirement. Don’t include any
portions you’re planning to leave for your children or spend on other assets, such as a
summer home, which will make the funds unavailable for covering your living expenses.

9.4.5 Other Sources of Funds

You may have other sources that will be available to fund your retirement needs. Perhaps you
will receive an inheritance from your parents before you reach retirement age or have assets,
such as real estate, that you plan to sell before retiring.

Whatever additional sources of funds you do happen to have, be sure to include them in your
retirement projections only if they are certain to occur. You may be expecting to realize a large
inheritance from your parents, but they may have other plans for their surplus savings, such as
donating them to charity.

Other unexpected cash inflows may also come along as you build toward your retirement, such
as lottery winnings, gifts, raises or bonuses, etc. When you do happen to receive these additional
cash inflows, consider adding them to your retirement fund. It’s also fine to include the planned
sale of real estate to when you estimate your retirement funds (at a conservative price).

9.5 Retirement Planning: Building a Nest Egg

There are a myriad of investment accounts, savings plans and financial products you can use to
build your retirement nest egg. Many countries have government-sanctioned retirement accounts
that provide for tax-deferral while your savings are growing in the account, thus postponing
taxation of your investment earnings until you withdraw your funds for retirement.
Due to the wide array of savings methods available (each with their own pros and cons) and the
fact that each individual will have a different solution based on his or her circumstances and
personal preferences, it would be impractical to discuss each in detail.
That said, there are financial goals and strategies common to pretty much everyone, and a core
group of investment vehicles available to most as well. A quick overview of the tools at your
disposal and the characteristics of each will help you determine what route is best for you. If you
feel you need assistance choosing the financial vehicles with which to build your nest egg,
consider consulting with a professional financial planner.

9.5.1 Government-Sponsored Vehicles

Most governments of developed countries provide a legal framework for individuals to build
retirement savings with tax-saving advantages. Due to the advantages these investment accounts
offer, there are usually limits regarding contribution amounts and age limits at which you will
stop enjoying the benefits of those savings plans.

166 LOVELY PROFESSIONAL UNIVERSITY