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Sunday, April 11, 2021

A complete guide on Retirement Planning

Retirement planning is a pre-retirement thing where you need to set a retirement goal and work towards it in order to safeguard your future.

Image by mohamed Hassan from Pixabay 

In simple terms, Retirement is an end to daily work life. Thus, creating a retirement plan is very essential to make those days of retirement more peaceful. Every individual who dreams of enjoying financial independence and a blissful retired life will agree on why retirement planning is important. Retirement planning is extremely important in both the cases of the government-private sector. It helps you to determine retirement income goals, and then design an achievable path to enjoy the benefits.

So here we have presented some tips and information that would help you in the Retirement Planning.

What is Retirement Planning?

Retirement Planning means figuring out life after the end of your salaried period. It is a process of setting retirement income goals and following them with all the necessary discipline. Generally, your retirement plan should be able to pay you at least 70% to 90% of your salary. Like for example, if you are making ₹ 50,000 a month now, your retirement plan should pay you at least ₹ 30,000 to ₹ 40,000 monthly. So for that, you need not only to save wisely but also to invest in high-return assets so that your savings grow at a faster rate.

According to the economictimes.com here are some of the investment options you can invest in post-retirement. This is not to say you should invest in them but to provide a fair idea of what the options will be like.

Why do you need retirement planning?

It is always a memorable event when you receive your first salary. Similarly, it is also going to be memorable when you would be cutting your cake at the retirement party. And before you know, you will be facing daily living expenses, medical expenses and struggling to maintain the balance between your spending and savings. At retirement, your regular income stops but the expenses won’t take a break. Moreover, emergencies are always unwanted and uninformed guests. So to deal with it and also to manage your expenses, a retirement plan is necessary.

What are the steps to retirement planning?

Retirement planning helps you to prepare your life when your paid days come to an end. By following the steps mentioned below, you will create a wise retirement plan for yourself that will not only support you but also your loved ones.

  1. Set retirement goals – It is very important that you preset your retirement goals before retirement. Define your goals in three categories that are short, medium, long term goals. Like for example, you want to go on a small trip with your family after retirement. So that can be your short term goal. If you are planning to establish a business in coming 3 to 5 years and for that, you will need capital funds. So that can be your medium-term goal. After a fun trip and establishing a business, now you reassess your savings and work on the numbers you see on your bank passbook. Let’s say you want to make sure that you have enough monetary funds left with you in the coming 20 years. So that can be your long term goal.
  2. Assess your current financial position – Comparatively, at the age of 30-35, your financial situation will be very different from the ones who are in their late 20s or in the early 40s. So you need to keep a track of your current finical situation. Do not worry or stress if you haven’t started saving till now. Even if you start saving from the age of 35 you can stash a good amount until your retirement (aiming retirement at 65) . For example, if you are saving 10,000 per month in a retirement plan from the age of 35 then until your retirement you will generate over 1.3 crore for you by retirement. However, the amount can vary depending on the returns yearly.
  3. Retirement amount – Calculate and Keep a track of the retirement amount you need according to your planning. This would help you to get a proper amount. Sometimes people retire in their late 50’s instead of 60 or 65. This is because they had already calculated the retirement amount earlier and have successfully accumulated the wealth to reach their goal.
  4. Identify retirement corpus builders – Apart from savings and provident funds, one of the best ways to get a recurring income post-retirement is by using a retirement plan. These plans will help you to meet your post-retirement needs. For example, ICICI Pru Easy Retirement Plan. It combines the safety of debt and the growth potential of equity funds while ensuring capital guarantees under any circumstance.
  5. Set up a system to generate the monthly income – When you are a salaried individual you know you are going to get a cheque after the end of every month. But when you get retired, the paycheque has to be arranged by you. For that, the most convenient way of ensuring a monthly income is immediately availing an annuity policy. The annuity policy is designed to accept investments and grow funds. It creates a stream of income or payments for the investor. This will ensure a mixed sum of money is provided to you at the end of every month.

When to start retirement planning?

The average work-life is somewhere between 30 to 35 years. So its best to start planning the retirement plan as early as possible. For example, if a 25-year-old starts planning for his or her retirement of a corpus of 2 Cr. He or she is planning to get retired at the age of 60 which is 35 years from then. So they should have to make a monthly saving or 3500/- with 12% returns. This would help them to achieve their goal and attain more money which would somewhere between 2 to 2.5Cr. Now if he or she decides to start saving at the age of 30 which is 5 years late, then at the age of 60 he or she could only make up to 1 to 1.5Cr of savings. A delay of 5 years can also make a lot of difference.

For proper planning, one needs to divide it into three phases that is investment phase, accumulation phase, and withdrawal phase. In the first phase, you will save and invest money. In the second phase, the wealth should be accumulated with respect to the amount monthly and duration of the contribution. In the third phase or the at the time of retirement is where you will be needing this money for withdrawal.

Here are the Takeaways

  • Retirement planning is a process of setting retirement income goals and following them with all the necessary discipline.
  • Retirement planning is very essential when you are done with your paid days. Thus, having a retirement plan would help you to generate money and manage your life and expenses.
  • Having a retirement goal and working towards it is very important. Your small savings which you make currently can benefit you in a huge manner in the future.

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Mayuresh Patil
My Instagram says I am silent-ink, My Facebook says I am a Newsy Guy. And My Gmail says I am an Utter Chaos. To sum up, a combination of Creativity + Simplicity. Also, never underestimate the power of words.

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