Have you ever dreamed of having no need to work and enjoying your time, while also having your expenses covered by someone else? This is exactly the idea of retirement, where an individual keeps working for a certain amount of years before they finally move away from working life.
It is not a very far-fetched dream for many people, but it requires planning, hard work and ambition until it is finally realized. We will see in this article how such a dream can also be fulfilled with the help of gold.
What is retirement and how is it planned?
Retirement is often described as an individual's gradual or complete withdrawal from the working life.
In many countries around the world, retirement is a lifestyle that is governed and maintained by law regulations where individuals work for around 20-30 years before they retire. After this, they start receiving their retirement salaries either from the state or other related parties.
Individuals aiming to retire at a certain age - which varies by country around the globe - design saving plans and investment plans in their lives depending on their aims. They design such plans according to the employers they work with throughout their lives - mostly the state - as well as their monthly income and spending.
In some countries, employees can contribute a certain percentage of their salaries to their retirement accounts while having reduced or no taxes at all, and their monthly contribution could be matched by their employer as well. This is the case of the 401(k) savings account in the US, for example.
Of course, the culture and lifestyle of retirement are not in everyone’s mind; some people prefer earning cash throughout their lives and investing it on their own in various investments so that they can retire based on their profits later on. Some people have strong inheritance assets, so they prefer to spend more of their salaries without worrying about retirement.
Planning for retirement in the long term
The most important thing about planning for retirement - away from other aspects - is having a secure financial future so that you don’t remain forced to work beyond your retirement age. Let’s break that down!
Saving Money
The very basic common knowledge about retirement is that you need to save money during your working life so that you can spend it beyond your retirement age. The way to do this is quite simple in theory: Spend less than what you earn.
The exact amounts for this vary depending on your income, the number of years you plan to work, and your expenses. But in general, the following formula can be given to calculate how much of your income should you save for your planned retirement:
Percentage of Savings = (Retirement_expenses_ratio * Years_of_retirement) / (Years_of_working + (Retirement_expenses_ratio * Years_of_retirement))
The terms of the formula are explained below:
- Retirement_expenses_ratio: The ratio of your expected expenses after retirement compared to your expenses before retirement. For example, if your expected monthly retirement expenses compared to your expenses during your working life is 70%, then that value would be 0.70.
- Years_of_retirement: The number of years you want to be during pension, or simply speaking, the number of retirement years financially covered by your savings.
- Years_of_working: The number of years in your working life that you plan to work.
So for example, if you plan to be in retirement for 20 years and your expected monthly retirement expenses are going to be 70% of your current expenses while you plan to work for 25 years, then you need to save 35% of your monthly income to fulfill your retirement plan.
In this way, you can be sure that your financial future is secured even beyond your working life.
Managing Expenses and Jobs
The second important thing to do is to minimize your expenses as much as possible, and manage them efficiently so that you are not wasting any resources.
- Use Excel, Google Sheets or any smartphone app to make records of your expenses. This is important so that you know where your money goes each month.
- Avoid wasting money on non-essential things in your life.
- If you have a family household, then try to buy consumer goods in bigger quantities for better discounts instead of smaller pieces that are more expensive.
- Aim for annual discount periods such as Black Friday and others.
Investing Money
Now that you have some extra money that you have saved after your expenses, you have two options:
- Either store them as they are in your retirement savings account.
- Invest this money in any commodity so that it gives you a larger yield when you reach your retirement age.
Since most people only retire after 25 or 30 years of continuous work, then the first option would be a big loss for you since you are leaving your money in its current state as it is for a whole lot of years to come.
Basically, you will be suffering from inflation during these years and the value of your wealth will go down. This is why it is important to invest the money you saved into good commodities that can yield you some profit or at least remain above the yearly inflation percentage in your country.
And one of the best of these commodities that you can invest in for your retirement plan is gold.
Gold as Part of your Retirement Portfolio
Gold is one of the most precious metals out there, and it has been used as a store of value for millenniums across history.
Historical Values of Gold and its Benefits
Since we are talking about planning for a retirement that could take place around ~25 years later, then we should use a similar time span for measuring the return of our investments.
The following chart shows the price of gold for the last 25 years:
As you can see, the price of gold increased from $273 per ounce to $2759 in our times, which represents around 10x the initial price of the investment since the year 2000.
This means that if you invested $1000 in gold in 2000, then that investment’s value at our times will be around $10000, outranking any possible inflation during the same period and by a huge profit margin.
Gold as an Inflation Hedge
The purchasing power of 1 USD in the year 2000 was 50% more than it is today, for example.
This means that if you kept your money as it is in your local currency, then it could lose at least 50% of its value between the time when you start working compared to your retirement timing. This is not to include the effects of some other economic issues on your local currency in the calculations as well.
Gold provides a strong inflation hedge against this since its value always tends to increase year after year, even if it goes down for short periods of time. Compared to the lifespan of your working life, gold is one of the most stable commodities and inflation hedges that you can invest in.
The Value of Gold in Hard Times
One of the reasons why people prefer buying gold is that it has value in and of itself. Gold is being used in mechatronics, computers, sensitive industries and even as jewelry for ordinary people. Hence, it is not like paper currencies or other non-tangible assets that have no value on their own.
This is why even in the case of hard times (geopolitical instability, wars, social unrest… etc) then gold will keep its value or even see it increase compared to your local currency which could suffer from these issues.
Gold is considered to be a safe haven asset; meaning that it has low risks of losing its value over the years, and much higher chances for increasing its value over the time time.
And if your gold is physically located in your hands, then you don’t need to worry about other parties such as banks, the stock market and investment funds and their statutes, because your wealth is in your hand to control.
You can simply take your gold bullions and go anywhere you want with your wealth.
Investing in Gold With Ease For Retirement
Since not everybody has the luxury of having 24/7 access to physical gold merchants around the globe, then people have invented the concept of digital gold to take its place.
Digital gold is a digital representation of physical gold bullions that someone buys either in your name or on your behalf. The gold bullions remain owned by you, but they are stored in someone else’s locker instead of yours, and you can digitally buy/sell these gold bullions using a laptop or smartphone.
This is the idea of Phi Wallet; a digital gold service that offers 999.9 LBMA gold for users around the world directly from their pockets via mobile app, so that anyone from anywhere can own physical gold with non of the hassles such as dealing with finding a safe place to store gold or paying high fees.
It could be a good strategy to follow for your retirement: Earn your paycheck, and invest the surplus above your expenses in digital gold easily via the Phi Wallet app. If repeated over long periods of time such as 10 or 20 years, then your yield could be very high as we have explained earlier in terms of gold price and value.
Conclusion
Planning for retirement is not an easy thing, and you need to be making your decisions carefully. But once you do so, it will be rewarding to see your retirement savings account grow every month with the good investments that you have made.
It’s like planting a tree and watching it grow until you can finally eat its fruits after a long time of waiting.
Of course, gold is not the only commodity that you can invest in, but it will always remain the safest one and easiest to do compared to other more risky options.
