Essential Pre-Retirement Planning Questions

By | October 31, 2017

Retirement planning is one of the most crucial financial steps of your life. And to help you get it right, here are some essential questions you need to ask yourself before you start.Essential Pre-Retirement Planning Questions

Whether you plan on retiring soon or not, there are some important things you need to take into consideration before you decide to hang up your boots. After all, there’s a lot more to it than just deciding on WHEN to retire. You need to have a foolproof plan in place before taking such a monumental decision in your life.

The most important component of any retirement plan is saving enough to meet your expenses post-retirement. If you aren’t exactly sure how to go about it, don’t worry! We’ve got your back.

  • Plan plan plan!

That’s right! Like everything else, planning the golden years of your life also involves a lot of groundwork. Without a well-thought out plan, you can’t possibly think of making the most of your retired life.

Whether you want to spend your retirement years on a hill top, relaxing in a chair or travelling across the world, it really is up to you. You just need to plan according to your dreams. This involves choosing the right investment instruments, investing at the right time and thinking all your financial decisions through.

Additional Reading: Tips To A Financially Peaceful Retirement! 

  • Debt v/s wealth. Choose wisely

The financial decisions you make in your 20s and 30s have the power to influence your future. You need to think everything through and instead of opting for too many loans, you need to prioritise well.

For instance, if you want to buy that house of your dreams, your dream car can wait for a while. Trying to get everything at once can leave you in debt, destroying the dreams of a happy retired life. Think wisely!

Additional Reading: How To Plan For Your Retirement When You Are In Your 30s 

  • Tomorrow never comes

We don’t mean that literally. Procrastination might not be that harmful, but when it comes to your finances, it can cause some serious trouble. If, instead of building that retirement fund, you keep waiting for the right moment (thinking you’re too young to start just now), it could prove to be the worst decision of your life.

There’s no right time for investments. Whenever you have some surplus funds handy, you can always invest it in the right places instead of letting it stay idle in that Savings Account. You have the option of choosing the right investment instrument according to your age and preferences. Whatever you do, wherever you plan to invest, just do your research thoroughly. 

Additional Reading: 5 Ways Retirees Can Live A Good Life 

  • Discipline

Just because retirement seems like a distant goal, doesn’t mean you should take it too lightly. You may think you have all the time in the world, just because you’re in your 20s.

To take care of that issue and ensure that you regularly keep contributing towards your retirement fund, you need discipline. You could opt for an auto-debit saving option by opening a Recurring Deposit.

No matter how you spend the rest of your salary, you’ll at least know that you’re saving up for your retirement as well. Remember, a little discipline on your part can go a long way.

Additional Reading: How To Open A Post Office Recurring Deposit 

  • Become an investment monk

How? By investing in the right places (according to your preferences, of course). If you’re a spendthrift, it’s advisable to keep your hard-earned money out of your reach.

All you have to do is ensure that you divert a good chunk of your earnings into a Fixed Deposit for instance. Since you won’t have any access to this money, you won’t be able to spend it on unnecessary things.

Additional Reading: What to Do With Your Bonus Money 

  • Risk management is the key

When you’re looking at building a retirement fund, a certain amount of risk-taking is inevitable. However, the key is to manage your investments well. Investing in the stock market, for instance, is full of risks.

But, that doesn’t nullify the amazing profits you can make by investing in the right shares. All you need to do is do your homework and get to know everything about how the market functions before jumping in. That way, you not only become a pro at risk management, you get to make some great profits as well.

Additional Reading: Why Millennials Should Not Fear Investing In The Stock Market

These are just some ways you can build your retirement fund and ensure that you retire with enough to lead a comfortable retired life.

Now, let’s move on to some basic pre-retirement questions you must know the answers to.

  • #1: What?

What type of retirement are you aiming for? While we know there aren’t any ‘types’ of retirements as such, what we mean is that you need to know what your retirement plans exactly are.

If you want to open a small shack by the beach, it might involve a fair bit of planning and investment. On the contrary, if your retirement plan involves just putting your feet up and relaxing at home, you can think of taking things a bit slowly from a financial point of view.

It all basically boils down to what you actually want. Before thinking of new ways to make that dream of a fruitful retired life come true, you must know what your retirement goals are.

Now that we’re done with the ‘what’ part, let’s move on to the next.

Additional Reading: Your Guide To Retirement

  • #2: Where?

This is an important part of planning the golden years of your life and is closely linked to the first question. After pondering over what you want, you need to start thinking about the ‘where’ part next.

You’re probably wondering how this affects your retirement planning. Well, where you plan on spending your retired life can make a big difference to your finances.

Even if you plan on investing on a house of your own before retiring, the real estate rates are likely to vary. Similarly, rent rates vary from place to place as well. This is why you need to start thinking about the ‘where’ part as well.

If you intend to move to a posh locality, you need to start saving accordingly. But, if you’re happy where you are, you could take things a bit slowly (investment wise).

Additional Reading: Real Estate Investing 101 

  • #3: When?

The next big question is, when to take the big step? When exactly are you planning to retire? This could depend on various factors, like your current financial situation, your retirement plans, etc.

If you’re closer to your retirement savings target, you can think of taking the plunge early. But, if you still have a long way to go, better delay your retirement plans for a while (and also step up your investment game).

We know how tempting the thought of living the life of your dreams can be. If you’re planning to opt for an early retirement, you need to get a lot of things in place. Buying your own house, getting your own vehicle and planning your child’s education are three of the most crucial things you need to think about (apart from your retirement, of course).

So, once these essentials are clear in your head (and on paper), you can start thinking about the ‘when’ part.

Additional Reading: How To Plan For Retirement In Your 50s

  • #4: How?

The next thing you must start thinking about is how to go about saving for your retirement. If you have a clear financial target, then it’s all about looking for the right investment instruments.

Investing in the stock market could be a good option, provided you know everything you need to. Based on your retirement plans, your financial needs are likely to vary.

But, before you seriously think of investing, you need to try and close out any pending loans or debts you may have. You don’t unnecessarily want to carry debt into retirement period. If you’re just about to retire, you may want to look at possible prepayment options.

Since we’re talking about ways to save more and avoid unnecessary expenses, there’s another thing you need to think about. Get rid of all those extra Savings Accounts. Keeping more than one Savings Accounts open and then not using them at all is nothing but a waste of money.

Keeping inactive Savings Accounts will cost you money in the form of penalties for not maintaining a minimum balance.

Additional Reading: What Is A Minimum Balance Savings Account

  • #5: How much?

How much you need to save for your retirement is also an integral part of the previous question.  Like we mentioned before, this depends mainly on your retirement plans. According to what you’re aiming for, your target is likely to vary.

Regardless of how big or small your plans are, here are some ways you can go about saving the desired amount to lead the life you want post-retirement:

  • Make the right move: We mean this literally. To save more and eliminate all those unnecessary expenses, one of the foremost things you need to do is move to a cheaper locality. 

Living in an economical area now and saving a few bucks can guarantee a super classy locality after your retirement. Of course, moving localities depends on many things, but if you can make it work, it could give your retirement plans quite a boost from a savings point of view.

  • Switch to cheaper alternatives: Whether it’s at home, at work or anywhere else, try looking for cheaper alternatives for everything. This includes looking for ways to save more in your daily life.

For instance, if your house isn’t far away from work, you could either start walking or cycling to work. That way, you not only get to save on those fuel expenses, you’ll also get fitter by the day. It’s a great way to get back into shape while improving your savings.

  • Give up the extras: Give up on buying things you don’t really need. There’s no point keeping more than one car, bike or hoarding expensive watches. Spend your money only on things that are essential to your daily life and divert the extra funds towards your retirement kitty.

Additional Reading: Retirement Planning For Everyone

Phew! That should certainly help you get your pre-retirement planning right. Ask yourself these golden questions now and retirement planning will be a walk in the park for you. Give it a shot!

Need more on financial planning? Help is just a click away!

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