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Personal Retirement - Assignment Example

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Personal Retirement

The personal retirement planning is a disciplined and step-by step procedure that ensures a secured future retirement life. Problem Formulation and Determination of Objectives The first step in planning personal retirement is to determine the current and future objectives. For instance, among many options that are available, the most preferable option is the growth in income. On the contrary, others might consider the safety of principal investment and they prefer investment in less risky assets. Sometimes situations might require fixed periodical earnings. There is another option left for personal retirement and that is adapted by many smart individuals who prefer to invest in a basket of securities in order to diversify investment rather than concentrating the entire investable fund in single option (Goetzmann & Kumar, 2008, pp.1-10). Some individuals with higher risk appetite might also prefer investment in relatively risky securities in order to earn higher returns in future (Statman, 2004, pp.50-51). Hence, it is possible that the requirement on one individual will not be the same as other thus the requirement objectives are likely to vary from one individual to another (Grinold & Kahn, No Date, p.2). So, if I prefer higher current consumption assuming that the future is uncertain, others might like to create a safer future for their family and children (Montana State University, 2010) and the reverse scenario is also applicable. For my personal retirement problem I plan to efficiently balance and allocate current consumption and future consumption by vesting the available investible fund in various retirement options and thus bring certainty in future earnings. Determination of Investible Funds My post retirement income may come from sources such as pensions, social security, trusts, or annuities. The remaining required amount that I might fall short of (for purchasing assets or sudden contingent requirements etc.) may be covered by accumulated savings before retirement or through investment. In order to formulate my personal retirement plan I need to make two important assumptions as follows: Assuming that I have a fixed investible amount of $50,000 and my current earnings are $2000; Assuming that I would not require consuming any part of fixed investible fund unless there is an emergency requirement. Hence, according to this basic framework it can be said that I would like to carry out my daily activities financed by my current income and for any other purpose such as asset purchase, medical treatment, education fee payment, etc. will be funded through investment or owed funds. Determination of Retirement Age and Expected Future Earnings According to the RES (Retirement Eligibility and Services) and Federal Employee Retirement System that assesses the eligibility criteria for the annuity benefits for individual, the social security administration (SSA) benefits will be available to an individual as and on the day he or she retires. So, from the above discussion and eligibility criteria I would prefer my minimum age of retirement to be 60 years in the personal retireme ...Show more

Summary

PERSONAL RETIREMENT PLAN Introduction Most individuals work and earn money in their primes so that at time of retirement they have sufficient funds in their pocket to carry out their daily activities and requirements. Thus, there is one school of thought that suggests that an individual should not spend his or her entire earnings only on current day’s consumption requirements or desire, but should also focus on investment and savings of current income so as to reap its benefits in future when the individual’s earning capacity is likely to decline with time in future (IOWA State University, 2013, pp.2-5)…
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