Financial Focus Preparation Can Lead To Happy Retirement

Here’s some information that may interest you: The happiest retirees are those that feel financially prepared for retirement.

This finding, from a study by Harris Interactive, a major polling firm, may not be shocking. After all, you would probably expect that retirees who feel financially prepared would be more content than those who are worried about outliving their income. But you might be surprised by another finding gleaned from the study: Retirement happiness is directly linked to the number of years you’ve been saving for retirement, rather than your net worth - although the two factors are certainly related.

Just how long do you need to save before you can feel you’re financially prepared for retirement? In reality, there’s probably no one “right” answer, because everyone has different goals for retirement.

Nonetheless, the Harris survey does point to some interesting numbers:

* 61 percent of those who saved for 25 years or more said they were extremely satisfied with retirement.

* 51 percent of those who saved for 15 to 24 years said they were extremely satisfied.

* 46 percent of those who saved for less than 15 years said they were extremely satisfied.

The lesson seems clear: Start saving for retirement as early as you can. By putting time on your side, you greatly increase your chances of enjoying your retirement years.

The Harris survey didn’t just ask respondents about how long they had been saving and investing. Another question was designed to relate retirees’ happiness with the type of investments they had accumulated.

The findings? The happiest retirees’ investment portfolios were well diversified. Stocks made up the bulk of these retirees’ holdings, with smaller allocations in fixed-income securities and real estate. Apparently, maintaining a diversified array of investments helped contribute to the respondents’ feelings of being well prepared for retirement.

The survey’s results support many other studies that, over the years, have shown the value of diversification. But you can diversify your portfolio in many different ways. To determine which mix of investments is appropriate for you, consider the following:

* Your goals - What do you plan to do during retirement? If you envision traveling around the world and maintaining a couple of houses, your investment income needs will be far different than those of your neighbor who plans to stick close to home and do some consulting.

* Your risk tolerance - If you’re an aggressive investor, you’re willing to accept a greater degree of risk in exchange for potentially higher returns. If you’re a conservative investor, you’re more inclined to protect your principal at all costs, even if it means sacrificing growth. And if you’re a moderate investor, you’re somewhere in between. Your individual asset allocation - your mix of investments - will be shaped, in part, by your investment personality and risk tolerance.

* Time horizon - Your proximity to retirement will also help shape your investment mix. If you’re many years away from retiring, you may want to invest more aggressively, because you have time to bounce back from short-term volatility. But if you’re only a few years away from retirement, you might want to shift some - but certainly not all - your investment dollars into more stable, conservative vehicles.

There you have it: To be happy during retirement, you need to invest for many years beforehand, and you need to be properly diversified. Take action soon - the future will be here before you know it.

This article was submitted by the financial representatives of Edward Jones in Hagerstown: Greg Garner, 301-733-9465; Dave Walker, 301-766-7300; Joan Bowers, 240-420-8514; and John R. Pullaro, 301-766-7300.