Is Retirement Planning a Must?

 Is Retirement Planning a Must?

• by Dinesh Randive

Retirement planning is quickly gaining speed and is certainly becoming a priority for many people. Based on a survey, nearly 25 percent of the urban customers are getting ready to act on their retirement planning. There has been a huge leap this year as nearly 140 percent increase in people claiming to consider that retirement is a key priority financially.

Retirement is often considered to be a complicated issue to look at in a young age; but as researchers suggest, keeping a good financial plan can help you gain confidence and create a smooth transition from on stage of your life to the other.

Many people who have been surveyed have opted out other investments, buying cars, secondary homes, etc. and have chosen retirement planning as their primary priority. The people among the age group of 28-33 are predominantly looking at retirement as the key and planning towards it. Based on a study, single women feel financially confident about their finances after planning than men.

A survey also found that single women (close to 70 percent) feel financially secure significantly than single men (56 percent). Women tend to invest at an earlier age that is around 25 years compared to men who begin to invest at 26. Although, marriage shifts the trend as men become more responsible and gain confidence about their finances while women begin to depend on their men for the same.

While women tend to consult and go for conservative mode of investment, men think of retirement as an immense financial priority based on a survey. Overall, while looking for financial retirement plans, both men and women have their ways of planning towards it.

The UNFPA report also suggests that the number of Indians above 60 years is predicted to rise to 55 percent by the year 2050. The common mindset among people who are young is to make enough money for their retirement and live peacefully. This not only makes them feel good, but it also brings the question of have you saved enough for as long as you live? There are many things which require your money after you retirement and one of the primary thing is medical expenses. Therefore, it is better to plan for your financial retirement considering all these facts.

Benefits of planning retirement early.

 Benefits of planning retirement early.

• by Dinesh Randive

The basic trait of good investor is start investing early. By investing early one gets two benefits, namely the time value of money and power of compounding. The earlier you start saving for your retirement lesser the burden. Let’s consider two people who starts saving for retirement at different age as mentioned below:

Person A, age 25, saves Rs.5000/- monthly for his retirement.

Let’s assume he invests in a financial instrument which fetches 15% per annum for next 25 years.

Person B, age 35, saves Rs.15000/- monthly for his retirement.

Let’s assume he invests in a same financial instrument which Person A has invested and gets 15% per annum for next 15 years.
Let the retirement age be 50 years.
Person A gets corpus of Rs.1,62,00,000/-
Person B gets corpus of Rs.1,00,00,000/-
The solution is simple the earlier you invest with little the amount more you reap.

Accommodate for inflation

With rising price, the purchase power of money will decrease. Let’s say you have Rs.100 today, and assume you keep the money safely for 5 years. What would be the purchasing power of Rs.100 after 5 years would be? Say it would be around Rs.90. Now imagine you invested in a financial scheme which is earning returns below inflation, and then you could lose money. Hence a typical investment scheme should accommodate for growing inflation.

Track you investment – don’t overdo it

It is better to track the performance of your investment scheme regularly, typically once in every 3 months. Never track your investment on a daily, monthly or weekly basis, because your emotions vary in line with the market trends. Hence invest in right schemes.

Diversify your investment

It’s always better to diversify your retirement investment rather than investing in a single financial scheme. By diversification you can reduce a risk of losing money considerably. This creates balance between under performing schemes and performing schemes.

Gradually increase your investment when you earning increases

With career growth and proper finance management, you can slowly increase your investment for retirement fund. This can be done whenever you’re earning increases. This has two advantages one is you get the power of compounding and also you are indirectly accommodating for growing inflation.

Buy a necessary medical insurance.

You should typically buy medical insurance, which should take care of your medical expenditures in case you fall ill. This will help you prevent erosion of your retirement savings.

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Visualize your retired life

 Visualize your retired life

• by Dinesh Randive

Visualize your retirement and create a budget for your retirement

Research reports say that only 15% of people are saving sufficiently for their retired life. This tells that a large number of individuals are not planning for their retirement which is a harsh reality. It is better to start planning early and put things in action than starting late and realizing the mistakes made later. Visualize your retired life and then start planning early.

Avoid or get rid of all your debts

Ensure that all your debts are completely re-paid on or before your retirement. Be it a home loan, car loan, personal loan or any other loan, make sure you choose the term of these loans before your retirement age and then repay them. Only then will you be able to enjoy your retired life with 100% financial freedom, not when you have to repay your loans.

Always have emergency funds and protect them

Emergency situations can happen at any time and the expenses can be very demanding, especially when you get older. So you will need to revise your emergency funds on a year by year basis and enhance them based on inflation and change in your expense levels. They will also give you a sense of security.

Have a budget plan for retirement too

It is good to have a vision in career life and it also good to have a vision for your retirement life also. You need to visualize your retirement goals and create a budget for that too. Retirement means that you will not be working anymore and will have to pay for your expenses. You may need to spend more on travel and medical expenses.

Grow your retirement money

Find out how much retirement corpus you will need when you retire. A good financial planner can help you in finding right answers to your questions and can be of great help in this regard.

Reduce taxes

Your retirement income and corpus need to be tax efficient. You need to pay taxes only for the interest accrued. You will need to carefully select your investment option that can help you in reducing tax in your retired life.

Have enough medical coverage

Plan you medical coverage well in advance because your employer will stop covering you under the group mediclaim. At old age, medical expenses can become inevitable and lack of proper planning in this aspect can create a lot of trouble.

Create a will

To avoid any relationship conflicts among your next generation, you will have to draft a will that will distribute your fixed and financial assets to your legal heirs.