People who have planned financially for their retirement and started saving for it at an early age are better equipped at dealing with their post retirement years. Check out the nine golden rules of retirement planning.
What comes to your mind when you hear the word ‘retirement’? Relaxation, no stress, seven-day weekends, globetrotting trips, sleeping till noon. It is true that retirement marks the start of a golden phase in a person’s life. Retirement is the time when you can finally put your feet up and enjoy life without any pressure of responsibilities. But the promise of golden years can quickly fade away if you have not planned your retirement.
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Retirement planning is extremely crucial for every individual as it is important to figure out ways for stress free living when you stop earning. It is evident that people who have planned their retirement and started saving for it at an early age are better equipped at dealing with their post-retirement years. Apart from a lack of retirement planning, the lack of foresight into the kind of life they want to lead in their post-retirement years hampers many professionals and prevents them from building a solid retirement fund. Now that we have emphasised the importance of retirement planning, we, at BankBazaar, have decided to roll out nine golden rules of retirement planning that will provide you financial freedom even after you call it quits from work.
- Visualise your post retirement life: You don’t need a soothsayer to tell you how much you need to save for your retirement. Humans are gifted with the power of visualisation and that can be used wisely to plan your retirement. While you plan your retirement, first and foremost, you should visualise your lifestyle post retirement. Visualising helps you answer a few burning questions related to retirement like at what age to retire, where to settle down, does retirement mean no work, what kind of luxuries you would like to enjoy post retirement, do you wish to travel the world, etc. Once you have visualised and answered all these questions, you can figure out a rough estimate of the amount of money that you might need to live the post-retirement life of your dreams. To be on a safe side, don’t forget to take external factors like inflation, slow economic growth, recession, etc. into consideration while calculating the magical number for your post-retirement finances. Once you have figured out a rough estimate of the amount of money needed to lead a carefree post-retirement life that you imagined, you will have a target amount to save towards and you can plan accordingly to accumulate those savings.
- Start building your retirement fund today: Once you have figured the amount of money you need to lead a comfortable post-retirement life, you will realise that saving that much money is an uphill task. When you know that the job in hand is tough, it is better to get started as early as possible. After visualising your retired life and calculating the desired post-retirement fund amount, you should jump right into action and start building your retirement savings. Right from budgeting, cost cutting to investing in a Fixed Deposit, Recurring Deposit, Mutual Funds, etc., there is a lot a layman with basic financial knowledge can do to build his/her savings. And the sooner you start the process of saving and investing, the sooner you will be able to build the desired post-retirement savings all thanks to interest that is compounded over time. If you haven’t acted on your retirement plan yet, start saving today to make the most of your time and money.
- Get the basics of investment right: Once you are into the retirement savings game, it is essential to understand the fundamentals of investing. One needs to learn about Mutual Funds, bonds, stock market, real estate investment, etc. to make the money grow faster. One needs to learn how to diversify their investments so that any loss incurred from one investment can be compensated by the profit earned from the others. You can get in touch with financial advisors to understand how investments work or you can grow your knowledge about the investment process by reading extensively on internet. There are virtual stock market simulators too where you can learn the tricks and trade of dealing with shares.
Additional Reading: What Are The Best Ways To Invest After Retirement?
- Skilfully juggle debt, savings and investment: The road to building a decent retirement fund is not easy. Apart from saving for retirement, one also has to deal with debts, financial emergencies and other priorities like buying a home, buying a car, wedding expenses, etc. Since debt and financial crises cannot be ignored, the best way to move forward is to skilfully juggle between managing debt, savings, and investments. Ideally, you should prioritise clearing off debts as soon as possible as interest keeps piling on with time. And once you have taken care of debt, you need to start saving and investing to build a retirement fund. At the same time, one must start saving for milestones like marriage, a Home Loan down payment, etc. and also be prepared for the uncertainties of life like job loss, hospitalisation, etc. Only people who reduce their debt and build a basic fund for monetary crunches can start saving for retirement.
- Strike a balance between conservative and risky investments: When it comes to investing for retirement, a lot of people are sceptical of losing their hard-earned money due to the volatile nature of the share market. Being averse to taking risks, such a conservative approach to investing will never allow your money to grow enough to take care of your post-retirement needs. On the other hand, there are a few rash investors who want their money to grow manifold overnight and are thus willing to take huge risks. But the key to smart investing is to strike a balance between conservative and risky investments. By taking calculated risks and diversifying your investment portfolio, one can build a decent retirement fund.
Additional Reading: 5 Ways To Ensure A Constant Flow Of Money Post Retirement
- Get Health Insurance that suits your needs: Apart from building a retirement fund, professionals need to find ways of reducing their cost of living once they approach the age of retirement. With the onset of old age, health problems are bound to arise and medical bills can eat into your retirement savings. Thus, Health Insurance plays a big role when you are planning for retirement. Depending upon the coverage and other services, one can choose a Health Insurance policy that suits their needs the best from a plethora of options in the market. Make sure that the Health Insurance policy you take covers your family’s needs as well.
- Buy a house keeping your post-retirement years in mind: Buying a house is a dream come true for each and every hard-working professional. But before you seal the deal and have a house of your own, there are a few factors that you need to consider. Apart from interest rate, tenure, and the EMI of Home Loan, one needs to take a close look at the locality where they are buying the house and whether the house suits the needs of their post-retirement lifestyle. If you have visualised living in your home town once you retire, then there is no point in buying a house in the city where you currently reside. Make sure that you have taken your post-retirement needs into consideration before you buy a house and design it in a particular way. The house should be your sanctuary where you can lead your post-retirement years in peace.
- Prioritise Retirement Savings over Children’s College Education: Being a parent is a big responsibility. Other than providing your children with materialistic comforts, it is important to teach them to be independent. A lot of parents go out of their way to save for their children’s higher education and marriage. While there is nothing wrong in doing so, it should never be prioritised before your retirement fund. Always choose to keep your retirement savings ahead of everything else as that will help you to lead a comfortable life even once you stop earning. Teach your children to be independent in life and pull the plug out of the Mom and Dad bank before your kids start to rely heavily on you for their financial needs.
- Re-visualise and Re-plan: Last but not the least important, it is necessary to revisit your visualisation of retired life once in every three years to see if your vision about your post-retirement years has changed or not. Since we are continuously evolving as human beings, it is no surprise that our needs and our vision about life changes with time. So, if you find that your visualisation of retired life has changed, then it is time that you re-plan your retirement and align your investment plans with your current vision of retirement. Also, you must keep an eye on the growth of your retirement savings over the years and assess if you are on the right track to attain the retirement fund that you had targeted initially.
Now that you are well versed with these nine golden rules of retirement planning, start planning and saving for the life of your dreams post retirement. And those who are disappointed about not having started saving for retirement earlier, it is important to understand that it is never too late to plan your retirement. Make your retirement plans today!