Top 4 New Rules for Retirement

Top 4 New Rules for Retirement
Previous rules about retirement planning are no longer effective in today's environment. The increasing cost of healthcare, longer life expectancy and the economic downturn are factors that force retirees to seen better growth in their portfolio. Meanwhile, there is also the pressure that drastic market drops won't completely destroy their nest egg. There are an increasing number of financial planners who are rethinking their old strategies. Below are the four new practices to look into:

• Separate the investment into different baskets – a lot of investors lump their assets together for retirement and use this to pursue a single strategy. This practice is very risky especially with today's market condition. An alternative would be to separate your asset into three classifications including short-term low-risk investments, intermediate-term investments which should be combination of stocks and bonds, and long-term investments.

• Don't focus too much on yield – it is said that cash is king. But getting good yield is difficult. Although Treasury securities are incredibly safe, the payout you can expect is minimal as well. If you want to enjoy higher yields, risks are necessary. There is a tradeoff between safety and benefits. To minimize your risks, focus on investing on quality funds. You should know exactly what you're buying into.

• Look into municipal funds – with this type of investment, you can enjoy tax-free yields and less volatility. Munis contain more value than before but you should choose wisely. For example, it would be a good idea to select general-obligation and essential-purpose bonds. Keep in mind that not all munis are created equal. Try to stay away from nursing home bonds.

• Give importance to dividends – it is obvious that quality is important but how can you determine whether a certain stock is can be classified as high quality? Well, its dividends are a good measure of its overall financial health. Dividends can also offset the volatility in its value on the stock market. Solid companies that are in good financial standing are worth considering.

As you can see, it is possible to save money for retirement even during an economic crisis. The key is to adapt your strategy to the needs of the market. It is important to be flexible and open-minded about investment options. With this in mind, the four new rules for retirement investing will hopefully help you build up a nice nest egg for your retirement years.

Author and entrepreneur Bernz Jayma P. is the owner of a financial blog dedicated to helping people expand their knowledge on personal finance. You may visit his blog at http://www.Invesmint.com.