INVESTING FOR RETIREMENT

Ideally, planning for retirement should begin many years prior to the date when employment is to be terminated and supplementary income will be needed. The earlier an individual begins saving to meet the needs of retirement, the less the dollar amount of money that must be set aside in each working year to ensure adequate funds will be available when they are needed. Someone who commences a retirement program at age 32 with the expectation of working until age 67 will have 35 years to accumulate a fund that must provide supplementary income for a minimum of 15 to 20 years. With the extended time frame generally involved in accumulating a pool of funds to provide retirement income, investments chosen for the task can have relatively long time horizons and subject their owners to at least moderate amounts of most risks and substantial amounts of some risks. This flexibility in the selection of investment assets is progressively reduced as an individual approaches retirement. Thus, an individual who is five years from retirement faces a much narrower list of investment possibilities than someone who is 20 to 30 years from retirement. One of the greatest threats facing someone establishing a retirement fund is the possibility for significant losses in purchasing power because of unexpected increases in consumer prices.