Oh, that blissful yet nerve-wracking word – Retirement! A picture of serene, idle days with as much time on your hands as you have always dreamt of; but also that scary thought of having as little regular income as we do not even wish to imagine! Are you constantly baffled figuring out whether retirement is a phase to be looked forward to or a phase too menacing to even think about? Relax, take a deep breath and let’s take this head-on! Retirement planning isn’t hard if approached with the right attitude.
Considering the transformation lifestyles have undergone in the past decades with changing technological, economic and social structures, planning for one’s retirement fund has become an essential facet of financial planning. Financial independence is or should be a crucial savings goal for everyone.
Why all the hullabaloo over retirement planning?
- Today’s world is a global, convenience-driven world. Various technological innovations and convenience gadgets are increasingly becoming an integral part of our lives. This has led us to be accustomed to certain lifestyle habits which requires some form of continuous disposable income. This underlines the need to create long-term savings for a time when regular income will cease.
- With ground-breaking research and achievements in the medical field, the average life expectancy has increased considerably, leading to a need for more funds to tide over more years of retired life as compared to preceding generations.
- Life has a way of throwing unpleasant surprises our way. During such cold times you will need the warmth of extra cash to fall back on. Consider a scenario where your son incurs a loss in his business venture or a time when you need professional services to get through your household chores. Such times won’t weigh you down if you have saved up appropriately.
- Pension benefits, especially if you’ve served in the private sector, are not as alluring or adequate as they used to be. Therefore, the need to supplement retirement income and save for the future is even more pressing than ever before.
Planning for retirement – Start early, start small!
It is said that every drop counts when it comes to filling an ocean. No matter how small the amount you set aside towards your retirement fund, you will reap manifold benefits over the years thanks to the effect of compounding. Your greatest ally when it comes to retirement planning is time. The earlier you start, the more your money multiplies. Also, the earlier you start the less burdened you will feel.
- Set aside a specific amount towards your nest egg, each month
Keep your savings flow steady and ensure your retirement fund is seldom touched for any financial requirement. Generally, the amount required for retirement is calculated based on the number of years of active service you have remaining at your job. As a rule, the shorter the job tenure remaining, the more you are required to save.
- Avail a retirement plan that meets your requirements
There are many investment plans that offer savings cum retirement solutions e.g. life insurance schemes which offer life coverage along with maturity benefits like annuities, lump sum payouts or financial coverage directed towards a specific event like medical expenses. Opt for one that best suits you based on your projected savings and needs.
- Diversify your financial portfolio while young to include risk-based financial products like equity, mutual funds and alternative investments
It is a known fact that higher the risk, higher the returns. So play on the uncertainty associated with certain financial products that can deliver high returns at a younger age when a loss can be compensated for without too much difficulty. As you age, safer assets will become more prominent in your investment portfolio as your risk appetite naturally decreases. The equity market vis-a-vis other assets are risky but is known to be generous to those who stay invested in it for a long period of time.
- Find out everything about your employment related superannuation funds and plan your savings requirement accordingly
Keep track of your gratuity and PF amounts and know what your pension or employer-provided benefits are going to amount to at retirement. Account for inflation and taxes to assess the adequacy of these proceeds against living expenses in the future.
The Finish Line
Retirement planning is all about figuring out the funds needed to sustain yourself considering the kind of lifestyle you wish to enjoy. While the above mentioned points are not exhaustive, they are a great starting point for your retirement planning.
Those serene, idle days at the end of the horizon are easier to achieve than you think!