Pondering Investment Portfolios and Planning Your Financial Future

No matter who you are or what kind of work you do, if you live long enough you'll find it necessary to live off your savings. Possibly your Social Security earnings will help, if they're still offered 20 or more years from now. How will you do it? No time is too early to get an investment portfolio going. The time to plan your financial future is now. First, the bad news…

Sobering Statistics

In Kathy Kristof's article about retirement in AARP Magazine, she refers to recent Fidelity Investment estimates. Fidelity has determined that when a couple turns age 65, they'll need to have $230,000 just to cover additional health/medical expenses for the rest of their lives. This means whatever you plan to live on must be saved in addition to this $230,000 for health care.

According to the Retirement Income Blog, baby-boomers without qualified savings plan have saved on average only $38,000 toward retirement. Those with qualified plans (IRAS, annuities and the like) have saved just $88,000. Keep in mind that baby-boomers studied were between the ages of 45 and 62 in 2008. If this doesn't reflect the lack of responsible saving by an entire generation, what does?

Get Your Portfolio Started

There's good news: a great article in November's Money Magazine by Bigda, Braverman, Crews, Mangla, Valdes-Dapena, and Wang provides many useful suggestions for how to put just $1,000 to work for your financial future.

One of their suggestions was specifically directed to young, budding investors. Bigda and others said to establish a "starter portfolio" with $1,000 by placing $300 each into Schwab's US Large Cap ETF (exchange-traded funds) and Schwab's Aggregate Bond ETF. Then, split the remaining $400 evenly into 2 other Schwab ETFs: the US Small Cap and the International Equity.

If you're in your 50s or older, begin to save as much as possible now. Place the money in fairly conservative vehicles, such as short-term (under 10 year) bonds and CDs. The key is to save now, save consistently, and save as much as possible. Cut back on all the expenditures you can and then lock up the money you don't use to begin building for your future.

Secure your Financial Future: Educate Yourself

Explore the expert money knowledge that's out there. Check out some of Suze Orman's books. Also, watch Clark Howard's segments on CNN and HLN on television. Take a look at Howard's website. Also, you might pick up some great money information from Dave Ramsey's books. Obtain and apply as much information about living a successful financial life as you can.

Plan to Work Longer While Saving More

Another bright spot: if people actually keep working longer to prevent themselves from drawing on their retirement money for as long as possible, they earn higher dollars on an already-large (ideally) retirement savings total. Plus, delaying the use of social security dollars until age 70 could bring a whopping 75% more money monthly-from $1,800 to $3,200, says Kristof (AARP Magazine).

Summary

Use these sobering statistics to compel you to save consistently from now on. Save up $1,000 and put it into the financial vehicles suggested above. Then, keep saving. Educate yourself about finances. Read books about money written by Suze Orman, Clark Howard, and Dave Ramsey. Plan to work longer so you can draw higher social security as you age. The time is now to prepare for your financial future.

Sources

Bigda, Carolyn, Beth Braverman, Veronica Crews, Ismat Sarah Mangla, Peter Valdes-Dapena, and Penelope Wang, "What to do with $1000 Now" in Money Magazine, November 2011

Kristof, Kathy, M. Retirement's "3 Most Urgent Questions," AARP Magazine, November 2011

Retirement Income Blog website