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When planning for the future, people are often busy in short -term news rather than focusing on a long -term strategy, although retirement planning can extend over decades.
This is just one of the many mistakes he makes or lives in retirement, according to Nick Nevos, the global head of retirement solutions and head of LifePath in Blackrock.
“If you think about pension planning, it will always be a long horizon.” “What we do is to immerse short -term news. If you are thinking about short -term news for pension, they are two completely different things.”
Think that a person in the twenties of the age would spend about 45 years of retirement. Then, upon reaching 65, they can expect to live 20 to 30 years on average. Completely, this represents an important time frame for financial planning. Even a 55 -year -old still has about a decade before retirement.
He said: “The reason for the importance of Horizon Time Horizon is longer than being in the market, and the better the likelihood of your success.” “But if we have the view of the short horizon on what will happen in the next year or the next quarter, this tends to not evaporate the investment in the long run.”
Nefouse also suggested that individuals often make errors regarding risks. He said: “We tend to think about risk in myopia like market risk.”
Instead, the risks should be seen as a concept of life cycle, including market risk, inflation risk, life -longer risk, human capital risk (job loss), and sequence risks (bad market returns). What’s more, individuals need to think that the risk is developing over a person.
In Blackrock, the model it adopts is something called GPS – growth, protection, and spending.
“When you are young, it is about maximizing growth,” he said. “This is where you want to have the highest shares waiting in your wallet. You really tend to growth shares. This is in the twenties and thirties of life, even in the 1940s. From about the mid -forties of the last century until you retire, we really want to start adding in more protection. This is when you want to start thinking about a preservation in protecting things or in fixed income.”
When you retire with a total amount in 62, 65 or 67, there are few guidelines on how to withdraw the assets systematically, and many avoid even thinking about “gradual disposal”. As a result, retirees tend to confirm their account balance, and they refrain from spending. They will use capital gains and income, but they resist dipped in the manager itself.
“This is another big wrong belief,” Nivos said. “Many people do not want to spend capital in retirement.”
In order to be fair, the fear of spending the manager is partially due to uncertainty about the longevity.
“When you look at behavioral research, it is not logical for people to spend on their manager,” Nivos said.
However, the goal of saving is to spend money in retirement so that you can live as you spend during your work years. He said, “You need to spend your manager.”
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To help individuals estimate the amount they can spend in retirement, Blackrock offers available to the public LifePath tool On its website, which calculates the capabilities of spending the individual based on his age and savings.
One way to address the main concept and others is to consider small decisions with great influence.
Nivos said that using automatic registration, the eligibility for qualified payment (such as the target date boxes), and the features of automatic escalation in plans 401 (K) can significantly improve the retirement savings.
Catched virtual investments, such as the targeted history funds, provide an organized approach to investment. This money is designed to be more oriental for growth when the investor is younger and gradually becomes more conservative as retirement approaches.
“It is important, that he does not sit in criticism,” Nivos said. “You are already in growth assets for a longer period of time.” He said this helps to increase the long -term return with risk management appropriately over time.
Many workers face an amazing set of retirement savings options, from HSAS to the traditional Roth 401 plans. With many options, how to decide the place of contribution – how much?
“This becomes difficult,” Nivos said, noting that the decision depends on personal preferences, the level of income and tax considerations. But the most important step? “Just start saving somewhere.”
When choosing between Roth 401 (K) and 401 (K), it is due to taxes.
“We can discuss (more) dung, which … grows from taxes and gets out of taxes, opposite the traditional, which comes out of your profits before the tax, then grows from taxes, and then subject to tax,” he said. But the correct choice depends on factors such as “current income and expected future tax rates.”
One option to look is HSA. “I would like to tell people not to overlook HSAS,” Nevos said.
What makes HSAS very strong is the feature of the tripartite tax: pre-tax contributions, money exempt increases with taxes, and the condition of use for eligible medical expenses, can be withdrawn from tax exempt-even in retirement.
He said: “If you can stand so that you don’t spend from your HSA, this is exempt from triple taxes.”
Nefouse added that the smart strategy in particular is “setting the priorities of the accounts that provide the employer’s matches.” “What people told to do is hit 401 (K), 401 (k), because this tends to be the match.”
The same applies to HSAS if the employer contributes. “If your company will give you money to share it in these, then move to these.”
After that, as soon as these rules are covered, saving the following becomes a “higher degree problem”, he said, which means that there is a good problem when building wealth.
Nefouse also discussed how the traditional idea of retirement as one moment – one day works, the next day that you don’t change – change.
Many people choose “partial retirement” or “consider” instead of stopping the work completely. They may reduce their hours, turn into a different role, or even explore a completely new industry.
“We refer to this stage in the name of the pension window,” said Nevos.
Unlike airline pilots, who usually retire on their 65th birthday, most Americans do not follow the history of strict retirement. Instead, between the ages of 55 and 70, they gradually move from working full time.
While many people say they want to work longer, the reality is different, and many people do not work at the age of 65.
Health issues – whether they are their own or wife – can force a former exit. Nevos said that the loss of jobs in the late fifties or sixties of the last century is another danger, as “it is very difficult to get the same prices.”
So what is the implementable advice? “Start planning early,” said Nevos. This means building multiple sources of income, understanding social security, and considering the guarantees of retirement income.
Social security plays an important role in this transition. He said: “The longer its postponement period, the greater the money that the Social Security Administration will give you.”
While the benefits start from 62, waiting up to 70 leads to much larger payments. “Think about it as a slide scale – you get the lowest amount of money from the government in 62, and more in 70,” said Nivos.
