What’s the best approach for ensuring a steady stream of retirement income? Discussions of this question inevitably come down to the two primary options: group plans and individual contracts. Fewer people talk about how to make your money work smarter before retirement.
Knowledge of all your options and what they entail is essential if you want an optimized retirement strategy (including a more purpose-filled life).
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One of the most typical methods of assessing the desirability of a particular financial decision is to evaluate the “benefits and associated costs.” Yet what is the true cost of a financial decision? Even in the simplest transaction, the cost isn’t just the amount that leaves your checking account. You must also consider the opportunity cost.
University of Washington professor Paul Heyne (1931-2000) was the author of a noted introductory level economics textbook titled The Economic Way of Thinking. Heyne defined opportunity cost as “the value of sacrificed opportunities.”
Money spent on one item is money that can’t be used to buy something else. If you choose to spend $10 on a pizza, that’s $10 that can’t be spent on something else, like gas in the car. And, what if you spend $10 on a pizza and then learn that another pizza shop is offering 2-for-1 deals.
In theory, this is a practical way of prioritizing financial decisions. Yet few typical financial planners will actually account for opportunity cost. Even fewer know how to calculate it.
Where You Stand Today May Determine
Where You End Up Tomorrow
While the financial crisis that originated with the subprime mortgage sector in 2007 is over, the last year has been one of challenge (and innovation). Join us as we assess two of the outcomes of the last year: one surprising, and the other not-so-much.
One thing is for sure: the use of credit, and the business of borrowing, lending and saving are in for a change.
“Don’t put all your eggs in one basket.”
This old saying reflects a common-sense approach to long-term asset accumulation. Even if current returns from a particular investment are quite profitable, there’s wisdom in not putting too much of your savings into a single financial asset or product, whether it’s in the stock market, real estate, certificates of deposit, or countless other items.
Since each class of financial asset possesses unique characteristics, a diversified financial portfolio typically includes a mix of asset types. Some may be valued for their guarantees or liquidity, while others may be prized for their steady income or potential for long-term appreciation.
There have been rumblings in the news about inflation, and whether the jump in gas prices (combined with an economy on the rebound) warrants the Feds raising interest rates. Despite these factors, the Fed does not anticipate raising federal interest rates.
So is there reason to be concerned? Let’s unpack inflation.