Retirement planning must begin early and in earnest for those looking to have a peaceful post-retirement life. We tell you how to plan it.
The circle of life follows a similar path for most of us. We grow up, get a job, have a family, fulfil all our obligations, and then retire. The retirement phase is supposed to be the golden period of your life. It is a time of re-discovery and fulfilment, a time to do all the things that you were too busy for before.
However, a blissful retirement is possible only when one has sufficient reserves for it. This is possible only by drawing up a roadmap in your working years - if you are in your 30s, you should already be planning for your retirement!
This is a simple retirement planning guide for you to follow:
- Make a plan. You can achieve all your future goals if you draw up a good roadmap for the journey. Take stock of what you wish to do post-retirement. Do you want to travel the world? Buy a house? Set aside money for your children? Whatever your goal, you will need to have the finances for them, accounting for future inflation and rise in living costs. Use a pension plan calculator to estimate your future needs, so that you can buy the right investments and insurance today.
- Save money every month. Money saved every month can build a large fund of money for the future. You can also earn savings account interest on it. If you wish, you can start a separate savings account only for your retirement planning. These savings will help you run your household when your income stops post-retirement. You can also grow the size of your savings fund by investing it in a suitable instrument like fixed deposits.
- Get a pension plan. One of the best ways to secure your post-retirement years is to buy a pension plan. It is a policy that provides life coverage as well as regular income in the retirement years. Use a pension plan calculator to find out how much income you will require, vis-a-vis the sum assured and other factors. You can choose between Deferred and Immediate Annuity as per your needs.
- Eliminate debt. You might need to take a loan to buy a house or car, or to send your child abroad for further studies. But it is important to settle all your loans while you are still employed. Unpaid debts can be a huge liability on your finances when you are retired and have constrained finances. Without a financial back-up, you may even need to sell some assets to eliminate the debt burden.
5. Do not waver from retirement planning. You might occasionally get sidestepped into diverting your savings and investments income earmarked for retirement, into other urgent expenses. If you have to make a choice between taking an education loan for your child or dipping into your savings, always choose the former option. You can repay the loan via EMIs, but it will take years to replace the savings you spent!