Financial Security in a Persons Retirement Term Paper

Financial Security in a Persons Retirement - Term Paper Example In order to have financial security in our retirement, we need to start saving, keep saving and also stick to our goals. We need to make saving for the retirement a priority. In order to stay focused, we need to know our retirement needs and save towards it. A good starting point is finding out our retirement benefits. Investing for retirement is vital in ensuring safe and enjoyable retirement. Due to uncertainty, the true quality of a person’s retirement actually depends on their planning and planning must begin somewhere (Berk & DeMarzo, 2014). To have a secure retirement one must understand all the necessary factors that are crucial in the realization of the set goal. In saving for retirement individuals must understand the time value of money concept because it influences any financial decision to be made. They need to start saving early enough to increase the worth of the money in the future. It is the idea that money available today is worth more than the same amount in future because of its potential earning capacity (Taillard, 2013). Because money earns interest, any amount of money is often worth more the sooner it is invested. The paper entails computation of the amount to be invested annually to earn $1,000,000 in 30 years and the amount earned at retirement. In addition, it discusses values such as time and the interest rate that can be changed to lower annual deposits while increasing benefits. Besides, it discusses asset allocation among three asset classes, stocks, bonds, and cash. It concludes by looking at the investment objective which in this case is capital appreciation. Further, it discusses investment constraints that affect my asset allocation. In solving the problem, I will use the money purchase method which takes into account annual deposits and actuarial factor that is based on annuity period (time horizon or age) (Berk & DeMarzo, 2014). This method takes into account the time value of money by using present value or ordinary annuityÃ'Ž