Guaranteeing a Life Beyond Retirement: Here’s How to Do It

Here’s your current situation: a well-paying job or a successful business with no financial worries. Your children’s education and marriage expenses are also taken care of through investments, and you have a life insurance policy to protect your family in unforeseen circumstances.

But what about your life after retirement?

A strategy to guarantee financial security for yourself and your dependent after you retire is the need of the hour. Once you’ve hung up your boots, you’re not going to have a steady income unless you make arrangements for it.

To help you with the transition, here’s a rundown of all things about retirement planning.

The Need for Retirement Planning

Retirement planning is a neglected aspect of personal finance planning. Mostly, needs like regular expenses, vacations, and children’s education take precedence. But, you need to think about providing yourself and your family a safety net for your golden years.

Retirement Planning
Image credit: Trak.in

If you belong to a joint family, you’re slightly better off since there are multiple breadwinners. But, nuclear families require you to have the plan to look after yourself and your family since you can’t rely on your extended family’s support when you grow old.

You might also not like the idea of being dependent on others, including your children, even though they’re willing to help out after you retire.

Working Out Your Retirement Fund

You probably have a retirement strategy that involves tucking away a portion of your regular income until you retire. But strategizing goes beyond regular savings.

Here are a few factors to consider that’ll help you plan your retirement better:

Your Current Age: You’ll have more years to invest and grow your retirement funds when you’re young. You should plan for twilight years early in your life.

Inflation: The cost of living increases by leaps and bounds annually. A coffee of Rs. 220 today will cost Rs 1025 after 20 years at 8% inflation rate. So, your current investments should be able to provide for this increased living expenditure in the future.

Other Expenses: Our susceptibility to falling ill may increase after the retirement. As the medical costs are rising considerably in India, it is important to plan your medical expenses that may arise after retirement. Should you buy a health insurance or build a corpus? You need to decide it beforehand. Similarly, your retirement years offer an opportunity for a whole new chapter in your life. You might want to travel around the world or go on extended pilgrimages. This new lease of life will heavily depend on the investments you make now.

 

Investment Options to Create Good Retirement Funds

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Pension Schemes and Provident Funds

There are many different schemes for creating a pension fund. The Employee Provident Fund (EPF) is one good option if you are a salaried individual.

EPFs enable you and your employer to contribute a certain amount of your salary into a fund every month. This fund is a collection of contributions from many employers, like you, with a calculated interest.

Public Provident Fund is another option. The government pays interest on your investment and like the EPF; it gives you numerous tax benefits.

New Pension Scheme (NPS) is a newer scheme where your investment can experience dynamic growth. The investment managers of NPS can choose to invest in equities which can increase your earnings over a long period.

Fixed Deposits and Post Office Investments

These are secure investments that will provide a set rate of interest on your deposits. Although this can’t help you deal with inflation, through planned and regular investments you can still create a secure safety net for your retirement years.

Retirement Plans from Insurance Companies

Many insurance companies provide retirement plan options where you can start investing into funds for your golden years. A ULIP retirement plan invests your funds in both equities and debts, and thus, generates high returns in the long run. Also, these plans allow you to switch funds from equity to debts in case of the market downturn and again back to equity when the market improves. Plans like ICICI Pru Easy Retirement give you the ability to switch investment between different fund options. You can divert more funds towards equities when you are younger, and switch to more secure investments as you grow older.

Along with an option to give you higher returns, some insurers also safeguard your money by offering a capital guarantee on the invested money. It means, on the maturity, you will get either the assured benefit or fund value, whichever is higher. You can also add pension boosters to your retirement savings to see your savings continue to grow without making the additional investment. In the case of your death during the policy term, your nominee will receive a guaranteed death benefit or the fund value, whichever is higher.

 

You can choose to utilize several different investment strategies like provident funds, equities, mutual funds and fixed deposits for financial stability when you throw in the towel. All of us look forward to a life of tranquility post retirement, and you can have that for yourself if you just plan ahead and think smart.

 

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