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Top 5 Tips for Retirement Planning

Tips for Retirement Planning

All these years of life, you abide by the tick of clock to follow the same chord of work. Does that give you a sense of accomplishment or not?

Life is a routine for many but it can be a complete span of responsibility for others. Well by choice or not, everyone has their own share of joy and sorrows, roles and responsibilities to deliver. And after all this, building financial securities in life can become a crucial role not for one but for all. Planning for life after retirement is an important aspect in life when you spend a considerable amount of your earnings in rent, fees, bills, transport, medical emergencies, etc. How and when to start is another aspect but the crucial part is to realize that you need to begin with retirement planning anytime soon in life.

If you are a salaried employee and know that your savings will not be enough to support your life after retirement, buying a retirement plan is a must.

Let us look further: what is a retirement plan?

 

What is a retirement plan?

A retirement plan is a way of building financial strategies of saving and investment to receive financial benefits when you retire. Retirement plans are also called pension plans. It is a category of life/annuity plans that are designed to meet the post retirement requirements such as medical or living expenses.

Who wants to compromise their lifestyle when their entire life has been a blessing to get the best to make a living?

But maintaining the same lifestyle isn’t easy especially when your active income stops. This is why buying a pension plan is important.

Before you move ahead with retirement planning, you must keep in mind some tips. Let us see the top 5 tips when you begin with retirement planning.

 

Top 5 Tips For Retirement Planning.

Retirement is the time of life when either your child must be moving away for their higher education or for jobs. This change of situation can alter the financial status. You may have sufficient savings for your child’s higher education. But what after that?

You cannot survive on peanuts and compromise on the lifestyle you already have. Even if you ignore the lifestyle, the inflation struck market is going to eat up the savings you may have. This will leave you with less money in future.

Keeping a step up for the medical emergency funds and other living expenses, planning for retirement is only for the wise.

 

These ar the 5 tips for retirement planning that you must bear in mind.

 

  • Start investing early to have savings grow by power of compunding.

Young generation barely thinks of the retirement age becasue they want to keep the worries away. Well, the brighter side of the coin which they cannot forsee is that sooner they begin with retirement planning, the better it is. Beginning investments when you are in your 30s will allow you to create a huge corpus of money, if you plan to retire by the time you turn 60. The period of 30 to 35 years is a long time that enables you to save more for your retirement. Starting early has its own benefits.

Suppose Rakesh, aged 25 years, invests Rs.1,00,000 per year for next 35 years when he will retire. The rate of return for this duration is 8% which will fetch him some Rs.3 crores. Now, if Shalab, age 35 years, invests the same amount for the next 25 years (age when he will retire), he will get Rs.1.9 crores with the same rate of return. The amount is Rs.1.1c or less than what Rakesh will get. This is why starting early with the retirement plan helps.

  • Calculate your retirement amount:

Knowing what will be the approximate amount of retirement fund that you will need is crucial. This will open up your thoughts to choose the retirmemt amount and pay the premium accordingly. Suppose your monthly expenses including all is Rs.50,000 and you plan to retire at 60. For the next 30 years, you will have to save enough to build a corpus of Rs.6.2 crores to meet the current style of living.

 

  • Choose your investment option wisely

It should go unsaid that you must choose the investment option wisely. When retirement is 10 years away it is important that you choose the funds of investment. With less time left for retirement, transfer all your funds from the equity to debt funds.This will protect your short term losses. Regular monitoring of the investments is crucial if you want to protect your savings and wish to receive the benefits.

 

  • Keep in mind inflation:

One of the reasons for our increasing spending would always be inflation. Before budgeting for retirement, it’s critical to take inflation into account. Savings today would not be enough to last for the next 25-30 years. In the future, a large packet of chips worth Rs.75/- will only be of a small size.

This is why keeping inflation in mind is a rational choice which the wise should make.

 

  • Free yourself from outstanding debts:

Retirement planning is for enjoyment. That is the time when you can have fun without any conditions. By this time, your kids are settled and most of the things are sorted. You can have all the money for yourself but only if you are free from the cycles of debts and loans. When planning for retirement, keep at bay the loan liabilities so that you can have a stressfree post-retirement life.

 

After noting the tips for retirement planning, you must know how to calculate the retirement amount. Use a retirement calculator to compute the amount of money you would need to survive post-retirement life.

 

What is a retirement calculator?

A retirement calculator is a financial tool that enables you to determine the financial corpus you would need. Using the calculator is important to establish the retirement funds for stress-free retirement life. The computation of the retirement fund will depend on your liabilities, current status of living, the city you live in, habits, child’s responsibility, etc.

You can compute the retirement corpus here.

 

Conclusion

 

At the age of 25 or 30, retirement appears to be a matter far off. Everyone wants to spend money on the latest electronic gadgets, vacations, and shopping, but no one wants to think about retirement. Everyone, including you, certainly hope that your post retirement life is as excellent as, if not better than, your work-life years. Nobody can afford to remain on someone else’s dime after they retire, so planning for retirement as soon as possible is essential. A lavish post-retirement life requires well-considered investments, adequate retirement insurance planning, and a debt-free profile. If you can accomplish that, the rest will fall into place. For more details on retirement planning, you can