Retirement Policy Statement
Retirement remains the most important financial goal of an individual and the responsibility of meeting this goal is completely on them. Many of you might believe that what you will get at retirement will be enough for you to live your golden years comfortably. Nonetheless, you need to understand that in these uncertain times, when you are not sure about your job, the need for a retirement policy statement becomes even more significant.
What is the retirement policy statement?
It is a document where you explain your accumulation phase and distribution phase of your retirement. It will help you to embark on retirement with a real plan in place. This statement will instill discipline in you. For example, if you are working in the private sector then you need to take the uncertainty involved with the job into consideration and plan accordingly. If you have penned down your retirement policy statement, it will help you to frame your asset allocation and spell it out in your investment policy statement. The fact that you have written down that you plan to stick with a 75% equity allocation and 25% debt allocation to start with and will then move more towards debt, tend to keep you on board with that asset allocation program a little more intact.
The difference between retirement policy statement and investment policy statement
The investment policy statement of an individual is a subset of your retirement policy statement. In your investment policy statement , you are getting into the desired asset allocation - the investment criteria that you are looking for when you pick investments, how you decide when it's time to sell, and so on. These factors are true even in your retirement policy statement; however, it also includes how you withdraw from your retirement pot. So, the investment policy may take the back seat and retirement policy may become the front runner.
Details of the retirement policy statement
This involves deciding on various factors, such as when you plan to retire, your expected years in retirement, and assets you would be using in your retirement period. You should not take your retirement very lightly. Having a retirement policy is crucial for your financial well-being as it helps you to establish a set of guidelines, so you are aware when you are steering off the road.