Right now, for most of us, retirement may seem like a really long time away. It doesn’t hurt to be well prepared, though. If you’re completely at sea about the idea of retirement savings, let’s help you. Read on and you’ll realise that understanding retirement saving is actually quite simple. Let’s tell you how to go about it.
First, you must work towards building your retirement savings. This gives you the discipline to save money and create financial stability for yourself.
In your 20s
- Start saving early
Begin by calculating how much you should save each month. Use a retirement savings calculator and it’ll be easy to figure that out.
- Your Employee Provident Fund
Got yourself a job? That’s a perfect place to begin your savings for retirement. Find out everything you need to know about the retirement savings plan that your employer offers. Do you know about your Employee Provident Fund? Your employer deposits a certain amount every month in an EPF account. This is deducted from your pay cheque. Allow this money to multiply. Now, you are allowed to make voluntary contributions to this fund.
- Automate your savings
If you want, you can create an independent retirement savings plan, aside from your employer’s retirement fund. It’s a good idea to put aside at least 10% of your annual income for your retirement years.
- Build your emergency fund
You should create an emergency fund for yourself. This will help in case you require money in an emergency. Your emergency fund should not be touched unless you have a ‘real’ financial emergency.
Additional Reading: Investment Options For Retirement
- Curb your spending
Create a budget and stick to it every month. With a monthly budget in mind, you can understand where your money goes every month. Keep your debts to a minimum. This will allow you to put more money aside for other life goals.
In your 30s
- Set your retirement goals
By the age of 30, you will have a clearer understanding of your retirement years and financial goals. Think carefully about your retirement years and build your savings to match your goals.
- How much do I save?
The ideal amount to save towards your retirement is at least 10% of your yearly income.
In your 40s
This is a good time to review your retirement savings plan and see if you’re on the right track.
Let us tell you about some common mistakes to avoid when it comes to your retirement fund:
- Not taking full advantage of retirement savings plans
If you get a chance to start retirement savings with your employer’s retirement fund, don’t pass it up. In case you get a pay raise, think about increasing your retirement savings contribution.
- Borrowing from your retirement savings
Some retirement plans permit you to borrow money from your retirement account. If you do this, it would leave you with a smaller retirement savings corpus. If you need money for other goals like your kid’s education, try an Education Loan.
- Don’t invest your retirement savings in your company’s stocks
It’s not a good idea to buy your company’s stocks to fund your retirement savings. If you get a chance, buy not more than 10%. In case the company falters, you surely don’t want a sizeable chunk of your retirement savings to be dependent on your company’s financial success.
- Don’t encash your retirement savings if you change jobs
Are you jumping jobs? Leave your retirement savings intact. The Employee Provident Fund Office has recently tightened withdrawal rules on retirement savings. This will help you save that money for your golden years.
In your 50s
When you’re in your 50s, these are your peak earning years when you’ll earn more. This means your savings can increase. Save more in your retirement fund during these years and reap the rewards later.
In your 60s
By the time you hit your 60s, you should begin to put your retirement plan into action. Start by evaluating how much you have and chalk out where you will spend your money. Ensure that you will have enough to maintain your lifestyle in your retirement.
Now, with this information, we’ve put you on the road to preparing for your retirement. Remember, start early and build your savings. That way, you’ll have time on your side!
Additional Reading: Investing in Your Golden Years
Haven’t started yet? It’s never too late. We have a variety of investment options for you.