Experts are of the opinion that retirement planning should start from the day you start earning. Although it is a sound piece of advice it is seldom followed. If you are complacent about retirement planning, it is time that you wake up from your slumber. First you need to ask yourself how much do you need after retirement to maintain the same lifestyle. Assuming that the inflation rate is 5% and your monthly expense is Rs. 30,000. After 30 years you will need a larger amount of money every month. With progress in medical science life expectancy is on the rise. Let’s assume that you live 25 years after retirement. In that case the value of the nest egg which you need to build will only increase.
Effective Tips For Retirement Planning
It is not impossible to build the required corpus. The following tips will help you to achieve your financial goal easily:
- It is advised that you start saving early. Do not defer retirement planning till late. For most Indians it may mean contributing to the EPF which is mandatory. By starting to save early you will have to save a lot less. An early start will also give you the freedom to take risks.
- You can invest in equities which although risky give higher returns than assets like gold and property. You can also invest in stocks and mutual funds.
- The next tip is to focus hard. Retirement planning should be kept separate from short and medium term goals. The corpus which you create should be touched only after you stop earning. If you do not have specific goals it will lead to complacency which in most cases will not help you to save enough. You should be saving atleast 10% of you income for retirement.
- It is also a good idea to start an SIP in a mutual fund and automate the process through an ECS from the bank.
- Make sure that you increase your investment as you grow. When you witness a salary hike, step up the investment accordingly. It is important to increase the savings and not fall short of the 10% mark to ensure that the nest egg meets all the requirements. When you get a raise it is a smart step to allocate half of it to your savings.
- Additionally, it is important to note that every time you change your job, your retirement planning is at risk. You will have to withdraw your PF balance and transfer it to a new account. Although there is the option of withdrawing from PF in case of emergencies, it is advised that you do not touch the corpus. By withdrawing the money you will no longer gain from the power of compounding.
- Lastly, it is important to know the product well before you invest. Conduct research on the product and compare it with other plans. Several products are available today which include life insurance policy, IRAs, 401(k), real estate, pension plans. Before you invest you must know how the product works and how you will gain from it.
Additional factors
In addition to the above it is important to bear in mind that a diversified portfolio will help you to churn capital gains with ease. Portfolio planning is of vital importance. You will need a portfolio which will churn out the capital gain in the long run. During retirement planning one should take into account the spending requirements. Understand your spending habits well before you start planning for retirement.
- Recent
- Most Read
- NPS Withdrawal Rules and How to Choose Pension Fund Manager
Date: 06 September 2018
- Why Retirement Planning should be on your Priority List
Date: 02 August 2018
- 5 Things You Don’t Know About Unit Linked Pension Plans
Date: 07 March 2018
- Everything You Need To Know About LIC Pension Plans
Date: 25 January 2018
- What Makes SBI Pension Plans Different from its Peers?
Date: 17 January 2018
- National Pension Scheme (NPS) – Govt Approved Pension Scheme
Views : 462515
- 10 Best Pension Plans in 2017-18
Views : 180059
- EPF v/s VPF v/s PPF: Which One is Better?
Views : 178461
- NSC Vs PPF: Which is Better
Views : 87998
- LIC Senior Citizen Pension Scheme 2018
Views : 81162
