Planning for your retirement is one of the most important responsibilities of your life. While you might have a vague idea about when you want to retire, in order to plan your retirement you need to answer a few more questions like: How much money you need to save? When do you need to start saving? What are the options available for saving or investing your money? Answers to these questions will help you plan a comfortable retirement.
It is never too early to plan for your retirement. The earlier you start saving, the more you will be able to save. It is advisable to start planning your finances right from the moment you get your first pay check. You may start planning your retirement once you’ve settled into a well-paying job, however, financial planning must start from the very beginning, no matter how much you are earning.
Here are some things you should consider when you start chalking out your retirement plan:
The first step is to draw an estimate of your regular expenses - grocery and utility bills, medical expenses etc. While you are at it, make sure you take inflation into account. Apart from these monthly expenses, also consider any expenses you might take on at a later age such as paying for your child’s education or wedding, or paying off any debt that you may have.
Based on these estimated expenses, you will have to arrive at a number which is indicative of how much retirement corpus you would need. It is important to make sure that the returns from your retirement corpus help you meet your monthly financial needs post retirement.
Your income may stop as soon as you retire if you don’t have a facility of receiving pension from your office or rental income. In such a case, you can depend on the investments you make at an early age to supplement your post-retirement income.
Put the plan into action
Once you have a fair idea about how much retirement corpus you would have to build for your post-retirement financial needs, the next step is be save and invest towards this goal.
Evaluate the amount of money you can direct towards your investments from your monthly income. A more stringent approach would be to invest first and then plan your expenses with the remaining funds available. Whichever method you choose, it is important that you commit to a regular investment scheme early in your life to ensure you meet your goal.
Once you decide when you want to retire, you will know how many years you have to save and invest. For example, if you are a 25-year-old and plan to retire at 55, you would have 30 years to plan for your retirement. Understand that early investing will come to your benefit, thanks to the power of compounding. Given the compound interest, you can accumulate a huge retirement corpus by the time you reach your retirement age. Late starters will have to invest more aggressively (and in riskier investments) to end up with the same size of retirement corpus as compared to those who start early.
It is important to choose reliable financial instruments to invest in, especially when you’re just starting off. It could be a government-backed saving scheme like Provident Fund (PF), or National Savings Certificate (NSC), fixed deposits, insurance cum pension plans or ULIP (Unit-Linked Insurance plans) etc.
Market-driven investments like mutual funds, shares, commodities and precious metals may reap higher returns at higher-risks as compared to debt instruments.
Insurance as a retirement investment
Having a prudent financial plan and sticking to it is key for a stress-free and comfortable retirement. As you start investing, buying the right insurance products not only builds your asset pool, but also secures you and your family. Exide Life Smart Pension Plan(UIN:114L114V01) is a Unit-Linked Insurance plan which allows you to build a retirement corpus while also offering a life cover up to 105% of the total premiums paid. You also have the flexibility to choose as well as alter the vesting age and the premium payment term. You will also be eligible for loyalty additions if you pay a premium of Rs.1 lakh or more in a year.
Starting early is the key to success when it comes to retirement planning. Even in the case of insurance plans, starting early can help you save on your hard-earned money - Thanks to lower premiums! You can secure the financial future of your family while also getting your life and health insured. By planning your retirement early and careful re-evaluation every few years, you can convert a part of your regular income into a fixed and long-term income that will earn you a comfortable retirement.