The Art and Science of Investment Planning

An Investment Plan for a Better Future

An investment plan is a long term strategy, aimed at creating wealth for future use. Experts and other great thinkers in economics have often stated that investing gives one an opportunity to choose how his or her future would look like. Of course, from the research, it is also evident that investment can buy one’s future since the amount of money an individual spends would proportionately determine the type of their future lifestyles. In other words, the amount of money a person invests today determines the type of life he/she will spend tomorrow. In this regard, if an individual spends for a longer time, he/she can be assured of better outcome in the future.

The Importance of Investment Planning

Many people around the world today think of big goals in life but very few accomplish such. Investment planning, therefore, is the only way through which an individual can make his/her future dreams a reality. Conversely, investment planning gives the foundation through which people can achieve goals since application of activities can help measure progress within a plan (Lusardi & Mitchell, 2011). Besides, investment planning gives people a better opportunity of separating their savings from the necessary expenditures needed to cater for the daily expenses. Having a plan also enables investors to identify the areas where they spend most of the time. Thus, creating a better room for improvements or staying on the track. It is also worth to point out that all that matters in an investment plan is not the amount that someone puts in the savings account but the consistency in setting aside the savings amount.

How Kathy would start retirement Planning

At the age of 28, the mother of two boys is apparently at her best age of settling down for a retirement plan. Regardless of the amount she would be comfortable investing in the retirement plan, Kathy has a better opportunity of making her future great with minimal savings on retirement if she starts now. The first thing that Kathy needs to put into consideration before starting a retirement plan is understanding the amount of money she needs. As mentioned earlier in the paper, the amount that an individual invests today would determine the type of life he/she will live tomorrow. Therefore, it is upon Kathy to calculate how much she needs to spend for a comfortable life. Of course, the amount she would want to spend in future should be proportional to what she is saving towards retirement today (Odour, 2010). The next step Kathy should take is to reduce the risks that she has before it is too late. For instance, now that she has not started paying off her education loan, she should make this a priority since she still has other things to accomplish. Whereas it is early enough for her to start her retirement plan, she should make sure that she clears her mind of other expenditures that might be future obstacles towards her investment plans. The next step would be getting adequate insurance. Risks can be reduced by having enough insurance policies such as house, car, health, and not limited to disability insurance. This would help Kathy in scheduling for her retirement plan.

The Best Investment Strategy for Kathy

Ostensibly, the best investment strategy that would fit Kathy would be planning for withdrawals for tax efficiency(Lusardi & Mitchell, 2011). The sources she opts to have for her withdrawals will have huge impact on her retirement taxes. Hopefully, by the time of retirement, Kathy shall have accumulated funds in multiple dimensions such as taxable money, tax-deferred money, and tax-free money. At 28, the single mother of two still has adequate time to set aside additional money in her taxable accounts. In Kathy’s scenario where she has low liability of tax, she is more inclined to pull from her deferred accounts.

Risks and Benefits of Investment

Any situation that has benefits must have some risks involved. Therefore, whereas early investment might lead to good life in the future, it also comes with its challenges. One of the biggest challenges that anyone would anticipate when making any investment is losing money (Lusardi & Mitchell, 2007). There are chances that the investment company might go bankrupt hence losing all that one has been saving. There could also be a possibility of one failing to attain the maturity value of his or her premium. Depending on the policy of the investment group, the investor would end up losing a significant amount of money. Therefore, before starting to invest for retirement, Kathy ought to be cognizant of the risk of losing her money during the investment process or enjoying her future if her savings get to maturity value. However, one way Kathy would limit the risk associated with investment would be by selecting the least premium that she can comfortably pay for regularly regardless of the financial supply (Lusardi & Mitchell, 2007).

Useful Resources for Investment and Retirement Planning

Thebalance.com is one of the most famous resources aimed at giving insight on investment and retirement plans. The site does not only give the new and potential investors the basics of investing but also helps business people to understand the available and most feasible plans that they may pick for better future. Nationwide.com is another avenue where investors can learn about retirement and investment. The website also gives further guidance on how to undertake small businesses and management of personal finance.

References

Lusardi, A., & Mitchell, O. S. (2011). Financial literacy and planning: Implications for retirement wellbeing (No. w17078). National Bureau of Economic Research.

Lusardi, A., & Mitchelli, O. S. (2007). Financial literacy and retirement preparedness: Evidence and implications for financial education. Business economics, 42(1), 35-44.

Odour, V. (2010). Investment Strategy and Portfolio Management.