For most of us ,Retirement planning is the last column in our priorities.Not that we do not understand,but with so many liabilities and responsibilities we hardly have savings left.This primarily happens because we never did our financial planning and so our loans are more than our income and we never thought at what rate children expense will rise.So the result is “i don’t have money to invest”.
Retirement Planning is not a task,which can be completed instant.It requires a long term committment along with a thoughtful process of investment.Even when you retire your assets created by investing for so many years has to be allocated or deployed in the right direction.
To explain it in a simple manner following are the key factors one should keep in mind when planning for retirement:
1.Start Early: Retirement planning should start at a very early stage of life.For a middle class investor, creating a retirement corpus to sustain that annuity he desired is the biggest task.The longer the time horizon for investment,the higher the accumulation. For e.g if a 25 year old start an SIP of Rs.2000 for next 35 years his corpus will be Rs.3.0 crore assuming 15% ROI.The same SIP started by a 35 year old will generate a corpus of Rs.66 lakh.
2.Asset Allocation is Must: While making your investment its very important that you choose the right asset class.Some investors tend to think that by investing in a pension Policy they have planned well for retirement.The most important question need to ask while investing is “Will this help me reaching the desired goal”.In my opinion one asset class will never yield you the desired result. Mix of products like PF,Gratuity,Equities,Pension Plans etc.will be required for reaching that dream goal of retirement.
3.What age to retire?– Normally , any individual will like to retire at age 58.This magic figure has come from most of the gov’t organization where it has been the maximum cap.But whether you retire at this age or before or later will depend on many factors.Your financial position, liabilities running at that moment and many others.
4.Post Retirement:Once reached that retirement age,the question asked is” from where will i get a regular income as desired”.Again, the answer lies not in one product but various options available to a retiree. Senior Citizen Savings Scheme,Post Office MIS, Annuity Product and MIPs are some options which are available today.With Reverse Mortgage scheme now in place,you can look at more options.Its very important that even post retirement you choose options after doing a proper research.Any adverse decision or choosing a wrong product will lead to struggle with your expenses.
5.Review:Once you have prepared your retirement plan and invested,a regular review is very important.There are many changes financially or non-financially which you go through in your life.These changes affect your savings which leads to changes in your investment habit. Thus, your retirement plan should accommodate these changes when required.
Financial Doctor Advise: Your decisions affects not only you but your dependents.So its important that your family knows what you are planning and how you are planning.
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This and All the other Articles/Videos on this blog are for general Information and educational purposes and not to be taken as an Investment Advice. Any Action taken by Readers on their Personal finances after reading our articles or listening to our videos will be purely at his/her own risk, with no responsibility on the Writer and the Investment Adviser. Registration Granted by SEBI, membership of BASL and Certification from National Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
Planning becomes necessary in the lives of all those people who have managed to earn significant portion of wealth. What do you think is important when planning for retirement in terms of financial planning?