Question

Answer the following in 25 words or more

What does it mean when people say, “plan for retirement”?

How should you “plan for retirement”?

How does what you learned about stocks, bonds, and mutual funds benefit retirement plans?

Where does your income come from in retirement? How do you calculate this income for planning purposes?

What if you don’t plan for retirement?

Answer 1

What does it mean when people say, “plan for retirement”?

Planning for retirement means saving currently every period and investing in different securities and plans in order to reach a specified goal once retirement is expected so that the sufficient income is generated from the savings after retirement.

How should you “plan for retirement”?

Planning for retirement means to chalk out a plan as to how much income is estimated to be required after retirement and according to starting to save today and investing in the various schemes as to reach the required goal.

How does what you learned about stocks, bonds, and mutual funds benefit retirement plans?

Various investment vehicles have different risk-return characteristics. For eg. stock are generally considered to be riskier but have higher returns as compared to bonds. Hence, an optimal mixture of these instruments helps plan for retirement.

Where does your income come from in retirement? How do you calculate this income for planning purposes?

The income in retirement comes from the investments that are done pre-retirement in the form of capital gains and dividends. This income is estimated using historical and future projections. These projects include complex calculations of market interest rate and the associated individual investment class returns.

What if you don’t plan for retirement?

Not planning for retirement can be a disaster as once regular income is stopped, one cannot take care of his/her daily expenses. Also, it becomes very difficult to cope up in case any huge medical expense comes up.