Ready to Retire?
Our aspirations are different at different stages of life. However, saving for the sunset years of one’s life should be a top priority for everyone. During different stages of our life we have different financial status, responsibilities, challenges as well as goals. Our approach for retirement saving at various stages of our life will be different and so are the strategies we should be adopting.
Anyhow there must be a judicious retirement planning right from the time you start earning and let’s see here some tips for retirement saving at different stages of life.
When you are at 20s:
This is a time you least think about your retirement as you might feel that there is ample time left for it. It is quite natural to think in this way. However, you can take a subtle step during this period:
Owning a house: Owning a house is the first step towards a secure future and retirement. If in the previous decade people became house owners in their late 30s,today investing in real estate is one among the first steps made by youngsters as soon they earn a job.
Owning a house as a first step forward helps you not just to save on rent, but remember, a home loan is one of the best tax saving instruments. Even if you are financially constrained at this period with the burden of EMI and initial year challenges, the tax rebate you receive back as onetime payment, can be utilised to invest in equities or in FDs, as you wish. The first commandment of real estate investment is- the early, the best. Moreover, taking the responsibility of paying EMI will make you financially disciplined, which will help you a lot in the years to come.
Let the savings grow unknowingly: Even if you haven’t started your retirement planning, let youremployee provident fund balance or pension fund balance grow unknowingly towards your retirement.
When you are at your 30s:
You become more matured and settled at this stage. Yes, this is the time you can do the maximum and the best for your retirement savings.
Make a plan: Setting up a realistic goal is the next step to be made.The greatest benefit you have at this stage is that you have time to plan and let your money compound for retirement. So create a plan with all your goals and start working for it in a systematic way. Creating a family budget plan is a good way to have a control over your expenses
Create a portfolio: A healthy financial portfolio contains life insurance policies, a good mix of equity and debt investments and health insurance. As you need to plan for your children’s education expenses, marriage expenses as well as fund for your retirement at this stage, this can be challenging. Working with a competent financial planner will be good at this stage for minimizing risk and maximizing returns.
Insurance policies can be in the name of both husband and wife, and investing in pension plans is also good. Investing doesn’t mean making lump sum payments, but you can invest in as many SIPs and schemes like RDs, which can build a robust portfolio for you.
Also ensure that you are make a judicious tax plan which will mean a lot for your savings.
When you are at 40s:
Build a contingency fund: You start worrying about your retirement life at this stage. If you have not kept aside a contingency fund yet, do it now. This is because life is getting more uncertain at this stage and anything can happen which can totally disrupt your financial stability. Since your goals like children’s higher studies and their marriage is nearing at this stage, any break up not only affects them, but also your retirement planning
Self estimation: Prepare an estimate on how much you need as retirement corpus based on your monthly living expenses, lifestyle and possible big expenses in the future. Now assess how much you are short and start working for it. And don’t forget to consider the inflation factor while making the calculations.
Fine tune the lifestyle: If you realized that your lifestyleneeds to be altered to enhance your savings, don’t delay it. This is because, you are already late in achieving a compounding effect for your retirement, so you will have to work a little more hard and invest surplus for achieving your retirement goals fast. The big expenses you will be facing at this stage like your children’s higher education should not deter your retirement goals.
Pay off debts: Forties is not a good time to borrow as well as to keep debts. This is the time when you have to attain financial security for the days to come. So pay off all those unwanted debts and stop the habit of taking miscellaneous loans. If your income is not sufficient, try some alternatives like a part time job or business, which would bring an additional income. If you are finding it difficult to manage your children’s education expenses, instead of breaking your savings, think about alternatives like education loans which they can pay back when they get job.
Invest in equities: Since you don’t have much time at this stage to let your money grow, investing in equities is a good way to receive good returns in a short term. The stock market can be attractive, however, remember, along with the possibility of handsome returns, comes the possibility losses. So ensure that you are playing safe and not impulsive. Remember, there is little time left for recuperating the losses incurring if any. Equity mutual funds are also good avenue to invest in.
When you are at 50s:
As your retirement is nearing, you can now slowly shift your savings to safer, debt instruments like FDs, post office savings etc. Review your financial challenges and see if you are short in meeting your goals, don’t hesitate to work post retirement to keep yourself financially healthy and sound.
What if still you have not attained your goals?
Assess whether you are financially equipped for your retirement period. If still there is a huge gap in attaining your retirement goals, the next step can be disposing your second homes/unused properties or gold. You may own more than one house, or might have inherited properties. Instead of keeping this, try disposing it to attain your retirement goals and have some liquid cash in your hand, which can be safely accommodated in flexible FDs.
Any stage of your life is not late for retirement planning. But the earlier you start, the better and the smooth it will be.