Bonds As A Retirement Planning Strategy

It is never too early to start planning for your retirement. With the life expectancy growing every year there is even more reason to start saving for your retirement. Experts recommend that you save at least 70% of your pre-retirement income to maintain a nice lifestyle. Bonds represent money that investors have lent to corporations or other government entities. For the people that are getting closer to retirement, the experts recommend that the percentage of bonds in portfolios can vary from 15% to 60%. These percentages are based on these factors:

• How many years left until you retire
• How dependent you are on any investments for retirement
• How comfortable you are with risk
• Do you still need to accumulate money for expenses such as for college tuitions for your kids or a new home

The idea is to never stop investing in your future. As much as you can every month can really add up. By buying bonds and investing with them early you can start a nice little nest egg. The only thing that you have to remember is that it is for your retirement. Those people who say that have 30 years until they retire often wait and then 30 years turns into 20 and then into 10 and before they know it retirement is here.

There are some things that you should consider when considering buying bonds for retirement.

• The coupon or Interest rate of the bond, try multiplying this by the face value of the bond so you can figure out the dollar amount of your annual payments of interest
• The Yield to Maturity or Yield to Call, the higher the yields the higher the risks
• The credit quality of the issuer of the bonds. A bond that has a lower credit rating may give a higher yield but the risk is greater with the issuer that won't be able to fulfill his promise

In order to get the full effect of the bonds you should not cash them in early, you should try to have an emergency fund so you won't touch the retirement fund. Before you buy any type of bonds sit down with a financial planner and figure out a retirement plan that will work for you. You should do some research before you hire a financial or retirement planner. You should ask for how much experience that they have, what services that they offer and what are their qualifications. You want someone who has plenty of years of experience and has a good client following but one that is not too full that they won't have time for you.

Call some brokers and some financial institutions like banks or credit unions and find out information on the type of bonds that they have available. Then consult a retirement planner and find out if this is the time to buy into bonds. This is your retirement that you are planning for so it is ok to shop around and talk to as many planners and brokers as possible.