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Post By Mariya Panwala
Be Your Own Retirement Planning Advisor
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Retirement Planning, Financial Advice, Insurance
When should I start planning for my retirement?
How do I plan for my retirement?
When asked about retirement planning, people usually end up asking these questions. In this piece, you will find answers to such questions.
The right time for you to start planning for your retirement is as soon as you start earning. Yes, you read that right. Here are the reasons why experts suggest that retirement planning should commence the day you start earning.
- A little corpus today, significant wealth tomorrow
- Medical expenses become frequent with growing age
- The older you get, the more the financial obligations you have
- Inflation
Over and above these, you’re not sure who can come to your rescue in times of financial crisis. Maybe the one you’re counting on is counting on you. Why depend on anyone else? Rather, take the reins in your own hands and get started with smart investments.
We understand financial or retirement planning could be a complicated task and you may be tempted to rely on others. Probably you would want to hire a financial advisor who would give you some tips to manage your own funds by charging a hefty amount.
Instead, you can be your own retirement planner. Here is a step-by-step guide to help you plan for your retirement.
Plan Today
To yield desired results tomorrow, you need to sketch out a plan today. The plan should incorporate all the necessary elements, changes, and should be feasible to fulfill your future goals. For example, you can revise your annual savings and investment plans in accordance with rising expenses, which are affected by inflation rates (among other things) so that your final corpus reaches a figure that will be adequate to meet your future expenses.
List Down Your Goals
List down the things you wish to do or achieve post-retirement. You may want to:
- Maintain your current standard of living
- Take care of the medical expenses all by yourself
- Fund your children’s wedding
- Go on a long tour with your partner or family
- Buy property or maybe a sea-facing home
Calculate the Corpus Required
Once you’re done with enlisting the desired goals, calculate how much money you’ll need to achieve your goals. A beach-front property today costs a couple of crores in a metropolitan city and over half a crore in a non-metropolitan city. These costs will inevitably rise by the time you retire. Likewise, travel and medical expenses are also sure to go up. Consider all these aspects and calculate your desired corpus.
Start Saving Start Investing
Savings are a traditional method that may not adequately help in producing the desired corpus. Take a smart(er) decision and start investing. Do some research, scan through retirement plans online, make a comparison, and select the plan that suits your needs. Consider the following factors to determine the total coverage amount you would require:
- Your Current Age – Your current age would determine the number of years you have to invest. Say, you’re 31 and you wish to retire at 55. So, you have 24 more years to invest.
- Your Current Annual Income and Expenses – Your current annual income and the expenses will determine how much you can invest. Say your annual income is 10 lakhs and the total annual expense is 7 lakhs. Hence, you have 3 lakhs to invest annually.
- Outstanding Loans – Bought a car or availed an education loan? Your outstanding loans will have to be paid even when your income ceases. So, make sure you have adequate coverage amount to pay off your pending loans.
- Major Cash Outgo – You may want to buy property or a sea-facing house or you may have humble business plans post your retirement or you may want to organize a grand wedding for your child. Events like these would require a lot of money. So, take them into consideration to determine the desired coverage amount.
Post-purchase Tips
Once you’ve chosen a perfect retirement plan, invest in it religiously and watch it grow. Having said that, purchasing a retirement plan is tough, but sticking with it can be tougher. But, you have to be discliplined and not let small hindrances affect your long-term investment plans. Follow these tips and save yourself from making mistakes that could ruin your long-term investments.
Income – Necessary Expenses = Premium Amount
Out of excitement for a higher corpus, do not opt for a plan that requires higher premiums. If you take up a plan with a very high premium, you might not be able to meet your basic expenses. So, before opting for any plan, you also need to take into account your disposable income. Ideally, deduct the necessary expenses from your regular income and the remainder will be the amount out of which you can make regular premium payments.
Pay Your Premiums Without Fail
Never forget to pay your premiums. Long-term financial fitness can be achieved only by taking short-term financial actions – by paying premiums regularly. Remember that it’s a seed that you need to water uninterruptedly for it to yield fruits when you’re most hungry. So, if you stop watering it, it will eventually dry out and would give back nothing for all the efforts you have put in it earlier.
DO NOT Break into Your Corpus before Maturity
“No one’s ever achieved financial fitness with a January resolution that’s abandoned by February.”
– Suze Orman
At times, you may be tempted to break into your corpus before maturity. Abstain yourself from doing that unless it is an emergency.
Successful financial advisers have been suggesting their clients keep a number of insurance policies to meet sudden financial needs. Health, personal accident, travel, and critical illness plans turn out to be rescuers in times of unforeseen eventualities. Not only are their premiums affordable, but they also protect you from being forced to break into your growing corpus.
The Final Verdict
Retirement planning is indeed a difficult task and no one else but you would understand your needs better. In addition, due to an increased life expectancy, the number of years post retirement till death has significantly increased. This has added to the reasons why retirement planning has become essential in the modern world. So, do not procrastinate and start investing for your retirement.
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