How often have you thought of retiring before the expected age, or wished to have a peaceful retired life up in the hills, with no work worries to bog you down? These are pleasant dreams indeed. But they can be turned into a reality with some effective retirement planning. There are multiple ways to fund your retirement years, including a private pension plan, annuity plans, govt. pension schemes, employer’s pension benefits, and so on. However, along with choosing the right kind of plan, one must also determine when to begin this journey and which steps to follow. Here’s a brief low-down on the same.
Why is retirement planning important?
When you rightly plan your finances for your retirement, you achieve the following objectives:
- A relaxed retirement lifestyle – In the absence of regular earnings, it is important to have a regular source of income to fuel your daily expense and lifestyle. A good retirement plan can take care of this aspect.
- Tackling inflation – Investing early in a retirement plan helps you make the most of compounding, which leads to a steady increase in your corpus, thus helping you tackle inflation.
- Taking care of medical emergencies – Health woes are common during the senior years. The pay-outs from a pension plan can help you deal with the finances required during such situations.
When should you begin retirement planning?
The right answer to this question is NOW if you haven’t already. Experts say that the sooner one starts planning for their retirement, the better it is.
Start retirement planning as early as possible
When you start your planning early, you have a long duration within which you can build a huge corpus. The extended period of time allows your money to grow and benefit from compound interest. That is why, in a retirement calculator, the younger your age, the lower the amount you will have to invest to achieve a large corpus. Thus, you can also start with a small amount, especially if you are still in your 20s and at the start of your career. Then, as you step up the career ladder, you can gradually increase the amount you put in each month.
Retirement planning for those in their 50s
Even though most tips to buy retirement plans in India say that one should do it at the earliest, do not worry. Being late on the train does not mean you will not reach the destination. As someone in their 50s, you would be at a relatively stable stage in your life. Your earnings would probably be at their peak. This means that even though you may not be able to leverage time, you can still invest a higher amount and thus, enjoy good returns. There are many retirement plans that have an immediate annuity option, wherein you can invest a huge, lump-sum amount a year/ few years before you wish to retire and begin receiving the pay-outs during your retirement.
Retirement planning at this stage is best carried out under expert guidance. That is why, along with using tools such as the retirement calculator, one must also consult a financial advisor.
Steps to plan your retirement effectively
To begin your retirement planning journey, you can use the following blueprint:
- Determine the age at which you want to retire – It can be at 60 years of age, or even at 50. This figure is important as it gives you an idea of the time you have to plan for your retirement. Remember, also consider your life expectancy when deciding on retirement age.
- Arrive at a figure for your retirement costs – Now, you need to calculate the amount that you would require for your post-retirement years. If your life expectancy is 80 years and you are retiring at 60 years of age, then you need to amass 20 years’ worth of daily expenses, emergency costs, lifestyle costs, and so on.
- Choose a retirement plan and start investing – Now that you know how much you require and by when, research thoroughly for a retirement plan that meets your needs and start investing.
One of the most important tips to remember when you buy retirement plans in India is to look for a fund that has a consistent growth rate. This helps your money to grow exponentially, so that you have the retirement life of your dreams, in reality.