Retirement Planning

sub_s002Retirement as a concept is changing and there is more to retirement planning than saving money. After retirement the quality of life can be improved by spending more time with family members and also traveling to some places where we can get to know some good values as well as enjoy nature. The transition into retirement is a very unique and dramatic step in life. Yet, this transition into retirement is rarely given the planning or thought it deserves. Unfortunately, far too many people go into retirement with little planning, and understanding of what will happen. Actually the rising stock market and the improving real estate property values all disguise the fact that the hefty company compensation plans in the past are no longer present today.

sub_s003But, middle-aged individuals believe that they can expect a higher standard of living once they retire and spend their time in leisure, but it is in vain. This is because they had not planned their properly when they were working and their standard of living declines significantly. Retirement is the stage where you should enjoy the fruits of your labour. These issues are a wake-up call for people who are nearing retirement. So it is important to plan ahead and be financially prepared once you reach retirement age. So it is better to understand the social aspects of retiree’s life and look into those investment options which suits better and face retirement with excitement rather than fear. Some like it. Some don’t. But retirement is a reality for every working person. Most young people today think of retirement as a distant reality. However, it is important to plan for your post-retirement life if you wish to retain your financial independence and maintain a comfortable standard of living even when you are no longer earning.

This is extremely important, because, unlike developed nations, India does not have a social security net. Retirement Planning acquires added importance because of the fact that though longevity has increased, the number of working years haven’t.

Our Retirement Planning Service involves:

  • Computing that amount that would be required post-retirement. This is done after taking inflation and time value of money into account.
  • Building your Retirement Corpus using Systematic Investment Plans (SIPs) and other long-term growth orient products.
  • Ensuring adequate post-retirement income through safe investments.

The asset allocation and selection of investment vehicles keep changing as your risk-bearing capacity diminishes. Everyone wants to have a comfortable retirement, but without adequate planning it probably won’t happen. People are living longer than ever before, which is obviously good news, but that means retirement is becoming more expensive.

We list for you a 5-step plan that should put you on the road to retirement planning.

sub_s004Step 1: Start early, and retire peacefully

Never delay in planning for retirement. Start as early as possible. Make a list of your financial goals and what you own so you recognize the gap between the reality and your dreams. When you are young, your risk-taking capacity is high. Earning well, and then generating as high a rate of return as possible, is top of your agenda. For example, start saving for retirement at age 25, so that even if you wish to retire by 60, you have an investment horizon of 35 years. The longer the nvestment horizon, the longer you can save and benefit from compounding.

If at the age of 25, you start investing Rs 1,000 per month at the rate of 6% compounding then the maturity amount (when you are 60 years of age) will be Rs 1,380,290; alternatively if you commence the same investment at the age of 35, then the maturity value at the age of 60 will be Rs 679,580. With a 10 year lag, the retirement savings at 60 years is more than halved!

Step 2: Have a plan

Assess your incomes and expenditure, and make provisions for contingencies. For example, set aside some money for travel and medical expenditure post retirement. Make a list of things you own and those that you wish to own e.g. a car or house. Try to cut down on the trivial expenditures and allocate your resources towards necessary ends like children’s education and marriage that you will incur in the course of time.

Step 3: Consult a financial advisor

If you are not in a position to make a workable plan, consult a financial advisor who will help you develop one. In developing a financial plan, your advisor should ideally present a number of alternatives to realize your objectives. Analyze these options from the retirement perspective, e.g. a limited equity exposure over a longer horizon could be vital even if you are a risk-averse individual. Remember, your aim is to make decisions that will be most effective in helping you to realize your future financial goals, based on your current personal financial situation.

Step 4: Track and review your plan

Your financial plan needs to be monitored at regular intervals to make sure you are on target to meet your objectives. You could do this on your own or take assistance from your financial advisor. Make sure the plan meets your investment objectives in changing market scenario. Also, understand and get comfortable with the risks, costs, and liquidity of your investments. For instance, as you approach retirement age you should consider paring the equity exposure and moving into debt, as you would have lower risk tolerance when you move towards retirement.

Step 5: Don’t dip into your retirement savings

Don’t touch this pool of savings pre-retirement. If you spend money from your retirement kitty to fulfill your present needs, you will lose out big in the long run. The corpus for your retirement will be that much lower. Planning for your retirement is not a difficult task. The challenge lies in implementing the plan with discipline.

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