Making Up The Difference

Consider moving or downsizing and in the process, tap into your home's equity. If you are healthy and enjoy your career, think about postponing your retirement. You can also reassess your financial portfolio and make riskier investments and hopefully earn higher returns. But the most popular way to boost your retirement income is to maximize your retirement savings today. You will want to determine if your employer offers a Defined Contribution Plan such as a 401(k) plan that allows you to save for retirement with pre-tax dollars and may include employer matching contributions. If your employer doesn't offer a retirement plan at work, you may be eligible to make tax-deductible contributions to an Individual Retirement Account (IRA). Even if you contribute to an employer sponsored retirement plan, you may also be able to take advantage of making contributions to a Traditional or Roth IRA.

Power of Compound Interest

Compound interest is the foundation for the implementation of a retirement plan and will help you bridge the gap between your present financial situation and your retirement goals. When you contribute early in your working career, the money you invest benefits from compounding. As such, your retirement investments are worth more.

Inflation & Taxation Constraints

Inflation is the ongoing increase in the price of most goods and services. It can significantly impact the purchasing power of individuals, partly because there is not one surefire way to predict the rate of inflation. However, being aware of fluctuating inflation rates is crucial to retirement planning. Compare the rate of inflation with the effective rate of return on your investment. For example, if you are earning 10% on your investment and the rate of inflation is 3%, your effective rate of return is actually 7%. Now consider the impact of taxation. If the earnings you make on your investment are not tax-sheltered, the money you make is subject to taxation. It is a safe bet that this taxation can reduce your retirement savings value by 50%. Let's revisit the true value of your original investment. It was supposed to yield a 10% return, but was adjusted for an inflation rate of 3%, bringing your effective rate of return to 7%. Now adjust for taxes (50%). See how inflation and taxation constraints have whittled your investment value to a mere 3.5%. Does it seem impossible to span the previous gap? Don't fear. Your retirement aspirations are not out of reach and HSBC can show you how an effective financial strategy can pave the way to relative retirement bliss. For assistance, you can contact an HSBC Securities Financial Advisor by calling 1-800-662-3343 or by visiting your local HSBC Branch.

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