Setting investment goals is an important task to do. Retirement goals are one of the most important goals that everyone seems to put off. It just seems so far off and the pressures of today are more pressing. I went through school that way. The immediate test or paper was what got the attention. Unfortunately, with retirement investing, we cannot function that way. We need to have such a large nest egg when we choose to retire that we just cannot choose to begin the year before we retire. Also, unlike our parents, we probably should not plan on social security even though the theory behind it was that we would be able to count on it. However, that is a political direction we should not go.

A couple of quotes from the classic “Alice in Wonderland” seem appropriate. The Queen said “Now here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that” Then there is the famous quote when Alice wanted to know which road to take. The answer was “If you don’t know where you are going, any road will take you there”.

Without a set investment goal, you might as well go out to your back yard, dig a hole and every month throw $50 into it. Don’t take any money out until you are ready to buy a house, provide a college education for your children or retire. It sounds foolish but that is in essence what we are doing without a set goal. There is simply no direction to it.

Setting investment goals means sitting down and defining where you want to be and how long you have to get there. You need to dream and also be realistic. For instance, you want to retire but when. How much are you going to need in your investments to be able to retire. What amount do you need to put away monthly and what kind of return on your investment will you need. The answers are a lot different for the 25 year old than they are for the 50 year old.

When looking at how much money you will need, you need to take into consideration the rate of inflation. The $500,000 investment fund may look good in today’s dollars but what will it look like in the year you retire? Also, you need to consider that you will probably live 15 to 20 years past retirement. Are you going to supplement your nest egg by a part time job? You may need to unless you have enough saved up to live off of the interest only.

In short, sitting down with your spouse or if you are in a long-term relationship, your partner needs to be done. And it needs to be done today. You haven’t the time to waste. You may also need to meet with a financial advisor to help you set reasonable goals. This advisor can also help you determine the different asset classes you will need to invest in to meet the desired rate of return. They can help you with the direction you should take, but ultimately it is your goal and your decisions that will get you to the destination you wish to go to. Remember though, that part of the goal is to enjoy the journey.

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Tags: asset classes, goals, investment fund, investments, retirement, retirement investing