Retirement planning is a major decision, and the thumb rule is the sooner you start, the better. When choosing a retirement plan, think about the advantages and disadvantages thoroughly. The core structure for planning for retirement remains the same for all ages, although retirement objectives or priorities change as people get older. To begin the retirement planning process, you first need to know why it is important and how you are going to go about it.
Why do you need retirement planning?
- To achieve your retirement objectives
- To pay for medical requirements
- To deal with uncertain situations
- To deal with inflation in prices of goods and services
How to plan your retirement?
- Pick or determine a retirement age
- Calculate the amount of money you will need throughout your retirement
- Consider your end-of-life wishes as well in this budget and whether or not you need to factor in things like prepaid funeral plans.
- Cut out expenses that are not necessary
- Start investing that money to retire comfortably
- Keep a close check on the estate planning processes
Age-wise retirement planning
- In your 20s: The best time to start thinking about retirement is while you’re in your 20s. You may want to enjoy your life right now, but if you can save now, you will have a substantial amount of savings when you retire. Your future savings initiatives will be built on a solid basis if you start early and capitalise on the power of compounding. When you are young you can take more risks and you can invest in stocks, equities for long term growth.
- In your 30s: At this stage, you’re probably responsible not only for yourself but also for your family. As a result, you will have to start being more strategic when it comes to financial planning. Furthermore, the longer you invest, you will be able to earn much more interest and savings. You can start diversifying your investment in mutual funds, gold or Index funds.
- In your 40s: This is considered to be an acceptable age for starting your retirement preparations, according to experts. In your 40s, you will have to consider your own requirements as well as that of others such as your parents’ health, or your child’s education. With both current and future situations in mind, your approach to saving at this age has to be a little conservative. Your capacity to take risks is less but your capital can be huge if you invested wisely in your 20s and 30s. You can also start investing certain amount in National Pension Scheme till you retire in your 60s.
- In your 50s and above: You still have time to start saving till you retire. You will have to be a little more aggressive when it comes to saving. All of this will be achievable by allowing yourself to set aside a significant portion of your earnings for savings.
Don’t put off starting your retirement planning until you are older. The best time to start is today. The more time you have before your retirement, the more you can benefit from a higher risk appetite and invest in assets such as equity that require a long investment horizon but have great wealth-building potential. The closer you are to retirement, the more you have to consider investing in safer assets such as debt instruments. Even though the returns are moderate, they are more secure and better for capital protection. Thus, it is imperative to understand your investment horizon and risk profile and start developing a plan that can help financially secure your golden years.