One of a person’s greatest long term goals is retirement and it is critical that this milestone is achieved with careful measure. If done incorrectly, there is a chance of unfulfilling the life you want after your career ends. The following section outlines the key aspects of retirement planning along with dispelling some myths surrounding it.
The Need for Retirement Planning
In simple terms, especially the ones that need to be spent to pay for dreams in one’s retirement, determines how much money a person needs to save. Financial independence goes beyond just sustaining a comfortable living. Traveling the globe, acquiring real estate, or launching a business are achievable goals but they can only be attained through appropriate retirement planning.
Retirement Planning Steps
Identify Retirement Objectives
Figure out what your goals are, at the very beginning. Are you planning to retire at 55? And how would you like to live during retirement? If your ideal living conditions is a leisurely life with multi crores worth in luxurious amenities, then you’ll need a large amount set aside, around 305 billion rupees.
Estimate Monthly Income Requirement
You previously calculated to Rs 3 crores, now figure out how much you can conveniently withdraw on a monthly basis. Head over to Google and search “compounding calculater” to get an idea on your monthly investment requirement.
Go to a reputable site like “math.com.” Step 1: Input Contribution Parameters Visit a reliable site such as “math.com.” You can enter the parameters such as the contribution amount you want to save, the interest rate, and the duration of the investment. After completing this, the calculator will then determine how much you need to invest every month to help achieve your desired retirement amount. Take note that this will vary depending on your retirement plans, the interest rates, and the time period you choose. 3 Also note that you will need to factor in inflation. Inflation Is An Essential Factor In Retirement Planning And Investment. During ones life, the expenses to purchase goods and services tend to increase, which makes it necessary for you to consider inflation in your investment plan so that your return will always be able to exceed inflation rates, allowing you to maintain your desired standard of living during retirement. Additionally, be sure to establish a monthly contribution or deposit plan. After you calculate the amount needed to reach the goal, don’t forget establishing a spending target! Based on the calculator’s results, you will know exactly how much you need to set aside every month in order to achieve the contribution goal. Just be sure to stick to your budget. Also if you make monthly contributions, they need to be maintained, so that’s why you need to budget accordingly. Common Investment Planning Myths There are numerous myths out there regarding retirement plan, and many people unfortunately believe them. So here are some that you need to pay close attention to and believe less. “Self Dependent”; Of course you should be self-dependent but it would be foolish to rely completely on your savings for financial security. “Health Insurance will Cover All Retirement Expenses”: Health insurance does not pay off all costs related to retirement; additional savings will always be needed for emergencies.
Sacrificing Current Needs to Save More for the Future: It is prudent to cut back on spending, but avoid completely eliminating current lifestyle needs and activities to concentrate on saving more for the future.
A Diversified Portfolio is Appealing for Both Investment Strategy and After Retirement: The return on a PPF investment may be lacking on certain levels, but adequate for other investment vehicles. The key is to never settle for the bare minimum. Elevate your investment portfolio.
Elderly Citizens and Retired Individuals are not Completely Free from Taxation: In retirement, the tax burden may be reduced as income diminishes, but the taxes shall remain and may remain stealth.
Having an Exposure of a Good Debt Fund in a Portfolio is an Excellent Defensive Investment Strategy: Risk averse debt funds are a safe investment, but with a cash balance higher than equity on account to the account allocation.
Final Thoughts
Deciding when to retire is an important question that requires prior due diligence, such as how does figuring out the perfect age and the best method: getting rid of your current mortgage and or any other debt in your name compare? Figure out the approach that works best for you and your age. After using the appropriate retirement goal planning tools, you’ll help set yourself on the right path for ensuring a stress free life for the future. But no action without intention. Stay true to your prescribed savings plan, know when to increase investments, and finally rest easy knowing your retirement plans are taken care of.
