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Defining 5 Terms in Retirement Planning

Jan 8, 2016

The idea of employer pensions or Social Security payments taking you through your golden years is becoming a thing of the past. These days, people are responsible for their own financial security come retirement. On top of bills, paying off debt, your children’s college tuition and other living expenses, retirement planning can be hard to wrap your head around. Here are five simple terms defined to give you a jumpstart on your retirement planning:

  1. Retirement: the period of time after you’ve decided to stop working.

    After you’ve stopped punching the clock, you’ll still need to provide for your daily living expenses. How you’ve planned your finances through your working career will determine how comfortably you’ll be able to retire.

  2. Nest egg: a sum of money saved over a long period of time, designated for a specific purpose.

    Growing your nest egg depends on how you see yourself during retirement. Would you like to travel around the world or live minimally? Take some time to envision your future and build a plan around that. You’ll have a clearer understanding of how much to save, and the timeframe in which you’ll need to save it.

  3. 401(k): an employer-sponsored plan through which employees can save money for retirement by contributing a percentage of their paychecks over a long period of time.

    Does your current employer offer 401(k) benefits? Some companies proportionally match what you put into your plan. Make sure to get in touch with your employer to learn the details of what they offer and how you can take advantage of saving while working.

  4. Asset allocation: a method of dividing one’s assets into different categories to establish a balanced portfolio.

    Have you ever heard the expression, “putting too many eggs in one basket?” Any investment, including those planned for your retirement, comes with a certain amount of risk. Asset allocation is a method of diversifying your investments so that your nest egg isn’t determined by only one factor. This asset allocation calculator is designed to analyze your age, assets, risk tolerance and other criteria to help build a well-balanced portfolio.

  5. Financial advisor: a licensed financial professional who can help individuals find the retirement plan best for them.

    It’s never too late to start planning for retirement, but the earlier the better. These terms only cover the basics to help you start thinking about establishing a plan for your future. As with most financial decisions, every case is special. It’s important to discuss your individual needs with a financial advisor. You can fill out an information request form and schedule a complimentary consultation today. PFCU Investment Services consultants are available to answer your questions.

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