Life has become a race where you are constantly running to achieve deadlines and targets. Here, targets and deadlines do not imply what your boss sets for you or what your work demands, instead it entails your monthly expenses, EMIs, rents, loans, child expenses and basically all your responsibilities which stop you from doing all that you love to do.
Amidst this, one major event invariably takes a backseat, which is planning for your retirement. Old age is inevitable and unavoidable, but a phase of your life where you will be able to fulfill all your dreams. Planning for this time is imperative and thus, it is high time you wake up from your sleep and start your retirement planning.
Benefits of Retirement Planning
Before you start calculating the funds you will need for retirement it is important to know how your planning will help.
Things to Consider when Planning for Retirement
Before you start planning you need to know when you will retire and when will you start withdrawing benefits. This will also help you to plan how many years you have to save. For people who are doing their own business or are in a profession where there is no retirement age, they need to think when they will need the funds. Pension plans if taken earlier helps you to accumulate a larger corpus.
No one can answer the question that how many years will they live post retirement but an approximate age can be thought of. Many life expectancy calculators are available online which can help. Thus, if you retire at the age of 62 and your life expectancy is say, 90 years, you know that you need to plan an income for 28 years.
Current Lifestyle :
You need to calculate the annual or monthly expenses that you incur, and also see which of these will remain or increase when you retire. For example when you are in your 30’s you might be paying EMIs for home loan and a car loan and you will be paying for school fees of your children and their monthly expenses which is something you will not need to pay later. On the other hand, your medical and travel expenses might increase and your household expenses will increase too depending on inflation. This will help you come to a figure you will need every year when you retire. You need to choose your pension plan accordingly.
While calculating your requirement post retirement you definitely need to account for inflation. Once you know the amount you will need at the current cost an inflation rate of 6-7% will need to be accounted for. Everything will become more expensive due to rising prices and thus, what you save as per the current scenario will not last you for long. 2 lakh today will not have the same value 20 years later thus, planning for a figure which has taken into account the inflation is important.
Sources of Income :
After you have arrived at a figure of the amount you will need when you retire, you need to list down the sources of income you will have then. If you have a business or some rentals coming in, the amount you need to save will differ. For people who have no sources of income, they will need to start investing in a manner that they can cater to all their needs later.
After all the above has been done, you will know how much money you will need to have a good and comfortable life and then you can start allocating funds annually and invest in different retirement plans and investment options.
This is to inform that safebima.com do not charge any fees/security deposit/advances towards outsourcing any of its activities. All stake holders are cautioned against any such fraud.