This is a brief introduction into REAL Financial Competence as it concerns your Retirement Protection.
- What to pay attention to
- What this means
- How it works
- How things turn out otherwise
1) What to pay attention to
When you have thought about it long enough, you will agree that you ultimately have three goals for your retirement protection, or in fact for any wealth creation:
You want that it's safe. Because if it isn't safe, you might end up with no protection, no wealth.
Once you know it's safe, next you want that it's quickest. Because if it isn't quickest, you might not yet be protected at the time you need it, or actually you might die before you enjoyed the benefits of what you've put aside for the future.
Ideally, you also want that your retirement protection is effortless. Because if you have to go at great length and into trouble you might hesitate to start at all or to keep going.
2) What this means
What means safe?
Your retirement protection is safe if you can be sure that at the end of your planned time frame you will get the repayment of all the amounts you've put aside over the years and buying power stability for the total of these amounts. You do not want to get back the money you put aside, instead you want to be able to buy as much in future as you could have bought today. Therefore, your protection reserves must not be affected by risk factors such as inflation.
Note that fluctuating prices (volatility) during your planned time frame is no risk factor, because you consciously give up the buying power of all protection reserves you put aside. Hence the price of any financial instrument you buy does not matter until the very end of your planned time frame.
What means quickest?
Although retirement protection generally requires a long time frame, you still want it to be as quick as possible, subject to being safe (see above). Therefore, you also want a buying-power-safe increase of the amounts you put aside, as compensation for giving up your buying power for a long time.
In short, your goal is simple: You need the highest-possible return as per the end of your planned time frame. Of course net, after all costs. You don't need and you don't want a high constant return on your protection reserves, because until the end of your planned time frame you don't want back your buying power anyway! In fact, constantly positive yields during your planned time frame would disadvantage you because they would mean constantly rising prices of your chosen financial instrument, so that you can buy less with every amount you put aside.
Therefore, you will welcome fluctuating (volatile) yields during your time frame and a high effective average yield as per its end. A high effective average yield as per the end of your planned time frame means high capital for you, in other words wealth. Wealth of course is the best retirement protection.
What means effortless?
The easiest retirement protection would be one where, once it's set up, your monthly protection reserves are automatically taken from your income upon receipt and invested for your retirement protection in a buying-power-safe way.
If this automatic investment, apart from being easy, could also benefit you in some way, even better! Maybe you can find an approach to retirement protection where you automatically do the same as you might do when you go shopping or when you stop at a petrol station: Where the price is higher than usual you might buy less, and where the price is lower than usual you might buy more to make use of the bargain.
3) How it works
In order to achieve the three goals for your retirement protection you can set up agreements with financial service providers that allow you to invest regularly and automatically in equity instruments because these represent productive assets. Productive assets offer maximum buying power stability in the long term, which perfectly matches your time frame for retirement protection.
Since the prices of equity instruments fluctuate a lot, you will benefit from falling prices because you can buy more units with every protection reserve you put aside. This will result in a high effective average yield as per the end of your planned time frame, in other words maximum wealth.
Thorough planning is key. Unfortunately, most people are more busy in their job throughout their life than they are busy in their brain once a year to plan and organize their financial affairs!
4) How things turn out otherwise
How do things turn out for the vast majority of people who do not invest a bit of time to think about what is best for their retirement protection?
Well, look around you. Are there many older people around you who live a life in affluence? Are they jetting around the globe to luxury resorts or to their own estates? Or are they packed like sardines in a can on an overcrowded beach near a mass-processing hotel once a year - if they can afford a yearly holiday at all?
Note that even a high income doesn't buy you good retirement protection, only what you keep and preserve for the future in a buying-power-safe and profitable way! This is just the start of REAL financial competence.
© DBMG Bennett 2000 - 2010. http://Affluability.com has far more for you. Note that we do not give any Financial Advice, instead we raise your Financial Competence. Financial Advice helps others to sell financial products, Financial Competence helps YOU to think for yourself. Choose what you want. If you want to acquire REAL Financial Competence to change your life forever and FOR REAL go to http://Affluability.com now.
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