The Importance of Retirement Planning

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Retirement can seem a long way off when you are 30 with two kids, a mortgage and a car payment. Still, it's a fact that retirement can certainly sneak up on you, and if you haven't planned for it, it can be a rocky road indeed. Stocks and bonds are a good long-term investment that should be integrated into the savvy investor's retirement savings plan.

United States Savings Bonds, for example, may be purchased regularly by pay-roll deduction. They present a very high degree o£ safety and provide a compounding of interest feature which is valuable. Recent changes in their characteristics provide that they need not be redeemed at the expiration of their normal period, but may remain untouched for an additional period.

Still another alternative is to exchange them for government bonds, which will provide regular interest payments semiannually. This means that our citizen of 50 may embark upon a program of regular purchase of these bonds with the expectation that those purchased in the beginning may be left undisturbed until the retirement date approaches. They may be exchanged or even be redeemed and the funds then utilized to purchase a cash annuity, bonds and/or stocks, all thus providing supplementary income of an amount as desired. Should the retiring citizen so desire he may withhold a portion of the redemption proceeds as a cash reserve.

The purchase of these bonds and/or their redemption involves no commissions or charges, since banks sell and redeem them; from this point of view they have much to recommend them to those persons who have an aversion to complicated business transactions.

We often hear the stated objection that such bonds do not guard against inflation. Granted— but neither do any fixed-dollar obligation, as we have remarked before. Even cash put into a strongbox is subject to the same inflationary trends. While the inroads of inflation are to be deplored, there is no dodging the fact that we cannot entirely avoid them. Nevertheless, the purchase of U. S. Savings Bonds combines saving with investment in a simple and very attractive package deserving of serious consideration.

As a "painless" way to provide future additional income it would seem that this expedient might easily be a part of the planned retirement of many; besides, the purchase of an annuity is desirable, as we make clear in a later section.

Carefully selected and regularly purchased stocks and bonds may also provide supplementary retirement income, but care in selection must be employed in order to provide protection for invested capital coupled with a reasonable rate of return. Long-term capital gains, while a desirable objective, are no longer paramount and must be considered entirely incidental. The prime purpose is to build an estate, which will provide the necessary wherewithal in some measure to guarantee a comfortable later life. The following information may be of value:

Bonds should be carefully selected so as to provide adequate protection plus a suitable return. While there is no question that the bonds classed as Aaa and Aa (Moody rating) are, practically speaking, beyond reproach, it is also true that such bonds will naturally offer a very minimum in the way of income.

Stocks should be of good grade, perhaps with strong emphasis upon the public utilities (electric power, natural-gas distribution, water, and telephone), since there are numerous examples of such stocks, which have paid uninterrupted dividends for several decades. High-grade preferred stocks may also be considered although the same money is better placed in bonds. Some good-grade common stocks (industrials) may also be bought; they need not be "blue chips," which are often overpriced, but could be some of those corporations, which are not "giants" and at the same time show a long and continuous record of earnings and dividends.

The best thing to do is to plan for your retirement as early as possible, and make sure that you and your spouse will be comfortable in your golden years. No one likes the thought of being stuck living on Social Security -- but it happens to all-too many people in the United States. Making safe investments early in life can make all the difference between a golfing-and-cruising retirement and being reduced to living in a tiny apartment on MedicAid.

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