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How To...

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by Steven Diegel

Whether through 401(k)s, IRAs, or other personal investments, people should start planning for retirement as soon as possible to take full advantage of available opportunities and avoid losing significant long-term returns, according to local financial advisors and investment planners.

They said a number of factors should be considered when making retirement plans, beginning with what standard of living must be financed and how early the retirement will begin.

"First you need to figure out when you want to retire and what kind of lifestyle you want to live," said Casey Coring, a personal financial advisor at Primerica Financial Services. "Then you determine what it will take to get you there."

Determining an investment goal which will finance a desired lifestyle should be the first consideration, Coring said. Most people planning for their retirement will need to accumulate more than $1 million in total investments to yield enough yearly interest to maintain a desired lifestyle.

"The average that you are going to need is $1.2 million in a nest egg to live the same lifestyle," Coring said. "It will take that much to yield the interest to live off of."

Building up to that amount will not happen overnight. Consequently, Coring said, the starting time remains the No. 1 priority when planning investments and the earlier the better.

"The longer you have to invest, the better off you are," Coring said. "If you have 30 years instead of 20 years to save, you will have a lot bigger nest egg."

The difference between starting early and starting late can be dramatic. At a conservative 12 percent rate of return, an investor with 30 years until retirement will need to invest an estimated $334 per month to reach an investment goal of $1.2 million.

Comparatively, an investor with an additional 10 or 15 years' time can invest far less even less than $100 per month to reach the same total.

"It is significant when you consider the compounding that can take place, especially when you do it over a 30- or 40-year time frame instead of a 10- or 15-year time frame," said Jim Lumpe, an investment consultant with NationsBanc Investments. "The younger people can start, the better."

Unfortunately, most people do not think about retirement at an early age.

"People that are 21 or 25 typically are not planning for their retirement," Coring said. "They are thinking about what they are going to do that weekend."

When planning so far in the future, investment strategies should also be considered, according to Mike Bennitt, CFP, president of Great Southern Investment Services.

While cautioning that everyone's

situation is unique, Bennitt recommended younger investors take a fairly aggressive approach with investments in the stock market, then scale back to more conservative investments just before retirement.

Bennitt said the stock market has historically offered a prime return on long-term investments, with no 10-year period ever posting a loss. However, the time in the market, not timing the market, should be the rule of thumb.

"The stock market is extremely efficient at taking money from the impatient and giving it to the patient," Bennitt said.

Financial planners said people should educate themselves about their finances.

"Most people don't understand what it takes to get to retirement," Coring said. "They should take the time to sit down with a professional and understand it."

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