Planning for retirement is a critical decision and the thumb rule is 'the earlier you start, the better it is'. While zeroing in on a retirement plan, you need to give a thorough consideration on its pros and cons. The basic framework of planning up for retirement stays the same for all ages however the retirement priorities keep on changing with age. The planning starts with determining the age at which you see yourself retired. To sum up an ideal corpus you need at the time of your retirement, you have to consider your present cost of living and taking inflation rate into account, come up with an ideal future cost of living. A simple approach is to weigh 'how much you want' for retirement against 'how much you are investing' monthly and identify the shortcomings and fill the gaps.
Only by planning timely and wisely, you will be able to make up the most of your golden years.
How to Plan for Retirement in Your 20s
Most of the people in their 20s think, they are too young to even think about retirement. Probably, they haven't heard 'time flies'. Well, it does, before you even know it.
Contrary to such presumptions, 20s is probably the best time to start planning for retirement as you have enough time at your hand and you end up collecting a larger corpus to ensure you'll have a fortune to enjoy at your retirement age.
There are Two Pros to Start Investing in 20s:
- You can start with lower premium amount as it will eventually add up to a bigger corpus in an interval of 10-20 years, after which you can switch to a higher gear of investment.
- You can gamble a high risk on your investment.
Starting a retirement plan becomes all the more important in 20s as your appetite for savings at this age will set up a foundation for the savings habit you'll develop for all the years to come.
How to Plan for Retirement in Your 30s
There's a famous quote by Bette Middler, 'After 30, a body has a mind of its own'. This quote is not to be taken literally. It means that you are more conscious, more self aware of your needs in your 30s.
This is the age bracket when you start getting more serious and feel a greater sense of responsibility towards yourself and your family. It signifies your transition from the careless youth to a more conserved family man. The need of your family takes a priority over your personal needs. 30s is the best time to start investing and building up your corpus as you are still free of the financial load in your life that comes with the subsequent ages.
There are Two Factors that make 20s and 30s the Best Ages for Retirement Planning:
- The power of compounding – The longer term you invest for, the more positive effect, compounding will play in multiplying your wealth.
- The averaging of lows and highs in a long run - If you are consistent towards your savings, neither the steep declines nor the momentary highs can astray you from your savings. Resultantly, in the long term you always end up getting more.
Those who are smart enough will start investing for their retirement in 30s and enjoy a sizeable retirement nest egg.
How to Plan for Retirement in Your 40s
Victor Hugo once quoted 'Forty is the old age of youth, fifty the youth of old age'. So true, 40s is the time when the last traces of casualness settles down to give way to a more serious attitude towards your life and savings.
40s is the age bracket, especially in a country like India, when the people actually start getting serious about investing in a retirement plan. According to the popular perception, it is just the right age for investing for retirement, neither too early, nor too late. Even the experts believe, it is a good time to start if you still haven't. You have 20 more years before you retire; that's enough of a slab to get you a decent nest egg.
There's just one glitch that makes retirement planning in 40s a little tight affair. This age is signified by a double fold financial burden, the educational expenses of children and the medical costs of parents. So in this phase you have to take a conservative approach to investment. The key is to stick to the planned path, not getting astray with transitory lows and highs of the market.
It is important not to constrain the present financial needs while saving for future. One way to do it is getting enrolled in your company’s retirement plan, if you still haven't.
It has been noted that a section of investors are reluctant to start planning even in their 40s because of a mind set up that their present savings will be enough to suffice the retirement expenses. This is far from truth, the savings no matter how big they look always dwarfs in front of inflation. The only thing that can help you keep up with the ever growing inflation is making a timely investment in a smart pension plan.
How to Plan for Retirement in Your 50s
Leave the smart section of investors, but for the majority, it's in the 50s that we are compelled to take a look at our savings only to dishearteningly discover that it will not suffice the future expenses post retirement. Now what to do? No need to panic, you still have time at your disposal. Make good use of the years that you still have, in building up a decent corpus. In this age bracket, you need a more aggressive approach to investment, you need to invest a bigger proportion towards your retirement savings. And 50s is the age when you can afford to invest heavily for retirement without having to compromise your lifestyle. As you reach your 50s, you are off of the financial burden of having to take care of your children and your parents at the same time. There are no major obligations now except to make up for the medical contingencies that might knock uninvited.
Now you are free to take care of your needs, hence, you should look forward to paying off your debts. Consider opting for prepayments and getting off of your debt burdens.
If you have invested in a retirement ULIP, it's high time you start switching your funds from equity instruments to debt instruments, to freeze the return you have so earnestly earned in all those past years. You cannot afford to bear the fluctuations of the market now, it's time to start getting conservative with your investment portfolio.
Anyhow, one thing to remember is that 50s is the alarm call, you cannot afford to put the retirement plan off any longer. If you haven't started investing for your retirement, do it now.
How to Plan for Retirement in Your 60s
Till we reach our 60s, most of us get into 'it's too late' trap. Believe us it's not yet late, you can still catch-up and make up for the time that you've lost.
You are not very far from your retirement, so you need to get more focused and more specific about your retirement goals. Let your financial consultant have a look at your portfolio and find out if there are any shortcomings between your accumulated savings and the corpus you need at the retirement. Even if you already have a retirement plan you should get an acid test weighing the corpus needed against the corpus expected at the end of the investment tenure. In case of a gap, you might consider increasing the retirement chunk you take out periodically.
If you've already retired or at the verge of retiring, and are still not in a mood to invest for a retirement plan in India, you should swallow the bitter fact that your savings will thin away in oblivion as the time goes. In such a scenario, a wise decision is to invest in an immediate annuity plan. This variant of pension plan needs you to pay a one time premium, subsequent to which you start getting regular annuities for a specified term or the rest of your life.
Many people believe that age is but just a mind set-up. If you feel you have still it in you, then you might consider postponing your retirement a few years ahead. You might request your employer to give you a more consultant kind of role where you can put to use your rich experience.
How to Plan for Retirement in Your 70s
In all probability, you have already retired and wondering whether or not your savings will stand by you, till you last. Let's face the bitter truth, it will not. If you don't plan for retirement even now, you'll end up witnessing the inflation eating away your savings that seemed enough a few years ago.
The only resort is to make a one time investment of your savings in an immediate annuity pension plan, wherein a lump sum is paid as a one time premium, the annuity of which begins immediately thereafter and continues for the time as the investor chooses.
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