1. Rethink Retirement Investment

Solin mentions it very bluntly that if you don’t protect your retirement investment against inflation, you will run out of money much soon than you anticipate. Inflation is the only thing that can ruin your retirement plans. It can depreciate the value of money. So, the money you are saving now will worth much less during your retirement.

So, what’s the solution?

You can keep certain amount of your investment in products like CD’s, treasury notes, savings accounts, bonds, and so on, where you money will grow according to the inflation.

2. Don’t Invest in Individual Stocks

Solin suggest people not to invest in individual stocks unless it’s just for fun. Individual stocks are too risky to include in your retirement portfolio. You don’t want it to be next Enron and drown all your money. Instead, make your investment a bit broader by investing in index funds, mutual funds, treasury bonds, and so on. For instance, you can put 33% of your money in international stocks,, 33% in stock indices, and remaining 33% in treasury or cash notes.

And you don’t need any financial consultant for such portfolio diversification, you can do it yourself. Make you portfolio as much less riskier as possible. An easy way to minimize risk it to purchase retirement funds.

3. Bonds

Solin says investing in bonds is a good idea. But he reminds people that bonds aren’t completely riskless. They are comparatively less riskier than stocks, but not completely risk-free. Besides, if you are worried about inflation, you must not put your money in TIPS (Treasury Inflation Protected Securities), as they can be quite volatile, at times, and may under-perform in times of lower inflation.

4. Depositing Cash

If a bank or financial institution is not FDIC insured, don’t deposit your money into it. Also, make sure the money you deposit should not go beyond FDIC Insurance Cap ($25,000). So, where should you go?

You don’t have to go anywhere. You simply have to search for banks in your neighborhood that provides good rate of interest, is FDIC insured, and is safe.

5. Annuities

If you go for annuity, select the one that offers fixed rate, not a flexible one, suggests Solin.

6. Mining Your Money

We generally withdraw money from our investments. However, we don’t usually take that amount into consideration while planning our retirement. Solin says, you must spare at least 2% – 4% of your savings for withdrawals. Besides, you must also have an emergency fund, so you don’t have to withdraw from your retirement fund.

He has mentioned many other points in his book which includes how to handle social security and pensions, early retirement, financial back-ups, other costs, state of your estate, and so on. I guess the book is pretty good source of retirement planning for beginners and experienced investors.

Why I did I make such a decision? Here are some reasons. Individually, they might not be quite powerful, but they all balled together.

More Time to Family

Managing a full-time job, and few personal blogs had made my life quite hectic. And I simply wasn’t able to devote any time to my family, which my wife keeps grumbling about, all the while. Besides, I have two kids, whom I want to spend more time with.

More Time to Write

Every individual has personal preferences, or some hobbies. I love writing, whether it’s a personal blog, or book, or simply a letter. When you, however, don’t get much time to spend on your hobbies, it frustrates you. Lately, I have had some opportunities, which I missed, and I don’t want to miss them anymore.

Financial Stable

if you decide to quit your job for good, remember you must be financially stable. Besides, you must have planned for your retirement, children’s education, monthly expenses, and so on. If I wouldn’t have planned these things, I would have never thought of quitting. Besides, we don’t use credit cards, we don’t have any loans to repay, and we have investments.

Frugal Living

My family have been living frugally since last couple of years, which leaves us with much more money to spend on valuable things. And we have decided to continue. Apart from saving a considerable amount every month, it fun to notice how it helps boost our creativity.

Note: Frugal living is not depriving oneself of anything, it’s about using your money wisely.

Working From Home

With several years of experience in financial advising, I have many options to work from home. Besides, my passion for writing opens many doors. Working from home with provide me with additional income, and help spend some free time. And, best of all, I could do what I really love, whenever I want.

Also working from home is better than commuting 5 miles every day. Eating leftover is less expensive than spending on lunch, coffee, and gas every day.

Health Improvement

When you are employed, you hardly get time to exercise. Besides, you don’t really care about what you eat or drink. The only few things that you are bothered about are work, money, and fun. I have quit my job because I want to get back in nice shape once again. Lately, I have gained much, and if I continue to be so, I will set a bad example for my children.

Other Sources of Income

My wife is employed, and she has many more years before she retires. I can, therefore, rely on her for my monthly spending. Besides, I have:

• Many personal blogs, where good revenue is generated through Adsense
• Money invested in various products. I earn interest, dividends, and profits every month.
• Plans to publish a book by September this year.
• A Financial Advisory business from home

Early retirement is certainly a good option. However, there are several things (I cannot say disadvantages) that you need to mull about. Spending free time, boredom, loose communication with friends, shortage of money, inflation, health problems, and so on. Only if you have a plan that takes care of all these things, you can think about retiring early.

The contributor must keep investing in this plan until the age of retirement (59 ½ years) to receive tax benefits. If he withdraws money after retirement age, taxes applicable on such withdrawals are comparatively low. The funds toward which the contributor has to pay is usually chosen by the employer.

Quite similar to other retirement plans, transfer to other plans or early withdrawals attract penalties. The ‘holding period’ generally ranges from 7 to 10 years. And if you want to avoid withdrawal or surrender charges, make sure you don’t withdraw money before this period. Once you have exceeded this period, you can transfer or withdraw funds without any charges. However, remember that transferring such funds is a lengthy and complicated process, as it involves lots of paperwork.

Besides, before you plan to transfer funds from tax sheltered annuity plan, make sure you read rules set by IRS. They have, in 2009, restricted the plans to which you can transfer these funds. Also, most employers have their own restrictions on such transfers.

Unlike olden days, employees now have better transparency regarding such plans offered by employers. Many employers also offer various options to choose from. You can also transfer this funds from one tax sheltered annuity plan to another, when you change your employer, provided the latter (new employer) accepts such transfer.

If you are an eligible employee, you can enroll in this plan at any time. Besides, you can contribute any amount, regardless of how much you employer agrees to pay.

Behavioral economist, David Laibson and associates have conducted a study and released a report on how the levels of monetary wisdom change with age. In their very interesting  paper “The Age of Reason: Financial Decisions over the Life-Cycle with Implications for Regulation” which is yet to be released, they say that though your experience and age help in increasing your fiscal wisdom till a certain stage of your biological growth, with oldage , your fiscal wisdom declines. Understandably, I think our frugality quotient too follows the same path as our other faculties of intelligence. Oldage does have a detrimental effect on our cognitive skills and with the general intelligence losing its sharpness, you can expect any specific intelligence too to decline owing to that. So what does all this mean to us? It means that you’ve got only a certain age in your lifetime where you are at your frugal best and you’ve got to identify that and cash on your financial planning and management skills. A time not earlier or later than this is going to help you in taking the wisest fiscal decisions in your life. If you are waiting to know this magical number –its 53! So make the best of your fifty third year for a good financial future.

After 53 years, senility takes over for most people and that’s when your cognitive skills along with your body start showing signs of inefficiency due to aging. So, if you are on the right side of 53, take care and see to it that you are ready with all your financial resources. Plan for retirement because you’ll not able to organize your money well after you grow old.

According to Laibson, after 60 years of age dementia increases and 30 % of people who are more than 85 years old are suffering from dementia, Most of the elderly don’t seem to be having the cognitive apparatus to manage their finances properly. Hence they are being taken advantage of. As most youngsters believe in a nuclear family set up without their elderly parents living with them, the elderly have to finance themselves during that age to survive.

So what should the aged do to protect their finances? They should make a trusted person the caretaker of their finances. They should keep their financial portfolio simple and invest in safe government retirement policies like the 401(k). You can also make a revocable living trust if you have enough finances. With a little bit of planning, you should be able to protect your financial resources even after you retire. You may not be able to stop the process of aging, but you can certainly take precautionary measures beforehand.