Financial Planning, Retirement Issues

Simple retirement plan

Simple retirement planMany people wonder if they have saved enough for retirement. They fall prey to financial planners or advisers that are really only interested in generating more commissions on sales of mutual funds and stocks. It is really tough to know if you have enough and it is even more difficult to know if you are paying too much in fees as well for trades that you might be doing or hidden fees that are charged by many mutual fund companies.

Simple retirement plan

There are some simple guidelines that we have followed and will benefit many people as long as you have patience, are willing to read a little bit and keep up with what is going on in the stock markets. My guidelines that I have followed over the past 10 years has benefited us greatly and we wanted to pass this along to our readers. You will be better off with your retirement if you follow these general guidelines.

Retirement Plan Guidelines

  • Invest in Blue chip companies
  • That pay dividends
  • That have a long history of always paying their dividends
  • That also have a history of increasing their dividends
  • That allow you to re-invest those dividends into the company at a discount
  • Diversify your investments across several companies
  • No more than 10% of your investment in any one investment
  • Avoid doing trades if at all possible
  • Constant re-balancing only costs you money
  • Stay away from mutual funds, they get a management fee every year
  • Buy good quality corporate bonds
  • Re-invest the bond income in more stocks
  • Above all do not touch your investment until it is time to retire

Stay Away from Mutual Funds

The mutual fund industry has done a great job of marketing these products to consumers. they promote professional management and they promote results that are sometimes impressive, but what they do not tell you is that they fall just as fast as the market when there is a downturn. Even if you invest in a dividend income mutual fund, and collect dividends into the mutual fund, they always pay themselves first. For example if your dividend income from all of the stocks in the mutual fund average 5%, your net income to the mutual fund after fees and expenses is going to be well below 4%.

By investing directly in stocks as per the guidelines above, you will collect all of the dividends and they will all be re-invested for you with no fee if you take advantage of the dividend re-investment plans offered by many companies.

This is about the most simple form of retirement plan that most consumers can follow and come out ahead of anything that you could do with a mutual fund investment. Note that if you worry about investment in your retirement plan, you may want to stick to guaranteed investment certificates. Although they do not pay very much they are guaranteed and you will get your money back when you need it. Unfortunately with stocks there is more risk and there is danger that your investments will not be as high as you had hoped when it comes time to retire, but the returns are far greater if you stick to quality investments and avoid the very high risk investments.

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