The Financial Cushion For Retirement

Financiers advise working people to create reliable reserves for retirement. The easiest way is to save income during periods of relative stability. The main thing is to do it regularly and from any earnings. It is important not to wait for better times to come but to start postponing at the first opportunity.

What is a financial cushion and why is it needed? This is a pre-accumulated amount of money that can help a family to survive for a while in the event of a loss of main sources of income. She can greatly help out the family during financial difficulties, which always arise unexpectedly and at the wrong time according to the law of meanness. 

Quite recently, a friend of mine at one point lost three sources of income that fed his family. It is good that he insured himself and created a reserve fund in advance, which helped him painlessly overcome the period of high turbulence.

It is advisable to determine in advance a fixed percentage that will be deferred on all earnings (say, 10-30%) and adhere to the chosen course until the reserve is formed, no matter what temptations stand in our way to financial protection.

Noble Purpose

Another plus – how do you get a loan when you are retired? Only if you have savings in your account. Therefore, you still can check loan companies reviews from FitMyMoney and try to apply. But smart businessmen think over the strategy of retirement in advance and create that very safety cushion for this.

In the United States, men retire at 67, women at 65, and receive an average of $ 1503 per month. One of the American pension system features is the ability to accumulate the required retirement amount after having worked in one of the companies in the country for 10 years. Many citizens manage to collect savings for two or even three pensions during their working life.

The main characteristics of an airbag are the availability, liquidity, and safety of our investments. So let's think about where to store it?

  • We exclude investments in risky projects where the probability of losing funds is very high. Do not use any dubious “investment” options!
  • We refuse to invest in highly volatile assets, where the price fluctuates unpredictably and over a very wide range, since money from the airbag may be required at the very moment when prices are at their lowest values. For example, at the time of crises on the stock market, stock prices of even very successful and stable corporations can fall by 50-70%.
  • Don't invest money from the airbag into something that cannot be sold quickly. What is the point in the “little box” if it cannot be used at the moment of urgent need? Imagine that you need the money tomorrow, but you have invested in a warehouse on the outskirts of the city, and it may take several months to find a buyer, plus the same amount to check and formalize the transaction.

For a Better Future

Let's pay attention to conservative instruments with fixed and predictable profitability, for example, deposits in a reliable bank. It is important to remember that the purpose of an airbag is to protect you during difficult times, not to increase capital.

Pension funds are a unique type of mutual fund. You invest in a fund, and it is managed for you. In this case, managers distribute your money across a diversified portfolio of stocks and bonds. You deposit the minimum amount of capital in the account, and the employee does the rest, allowing it to rise in value.

For example, a fund might ask for a minimum of $ 25,000 and aim to pay 4% per year of the total you have in your account. If in 25 years your account grows to $ 100,000, you can receive $ 333,33 a month from the fund.

Your efforts to build reserves can cushion the impact of any crisis in the most difficult situations. A financial safety cushion is a safety net that must be easily and easily accessible in a crisis situation. The main requirement for the accumulation of such capital is the choice of a reliable method of its formation, which guarantees safety and protection from inflation. 

Acting as a financial guarantor of protection against emergencies, a financial cushion gives a person psychological relief. Having such a reserve, a person calmly and soberly evaluates any troubles and their consequences and also has the necessary financial support to eliminate them.

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