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Why should one go for Retirement Planning?

Retirement

Retirement is a certain event and there is a chance that you will survive even after your retirement. As a consequence you are going to incur expenditures long after you retire and the cost that shall be incurred is expected and not expected! For an individual who has a family including children expected expenses maybe fees, EMI, general expenses, vings & investments. On the other hand unexpected expenses will be medical emergencies. Due to the above given factors retirement planning should be considered as a important & crucial part of one’s life. People often speak about retirement planning but don’t end up doing so due to the lack of awareness regarding to why one should make a retirement plan. A lot of things need to be taken care of even before you start having a systematic approach towards your retirement plan. Even before you start investing for your retirement you should start having a control over your expenses. Retirement planning not just affects your retirement phase but also has an impact on your lifestyle in your pre-retirement phase. 

Living the retirement phase with due comfort is something everyone wishes to have but only few succeed to understand the importance of having a strategic and systematic approach to have what they are wishing for. People usually rely on the pension funds or gratuity that they get from their employers but the amount always proves to be inadequate especially 

INFLATION

Inflation is a factor that leads to an increase in the prices of goods and services. Inflation demeans the purchasing power of money. Inflation is a key economic factor that is kept in mind while dealing in any kind of investment. Inflation is going to reach its heights when you will retire; so for you to be able to afford everything that you consume now in the retirement period you’ll have to make your money work for you! Inflation should always be considered while calculating the retirement corpus.

MEDICAL EXPENSES

The moment an individual retires, there are multiple expenses that make a whole in an individual’s pocket if there is no source of income other that pension. Various expenses such as medical expenses, lifestyle expenses, education fees etc. need to be taken care of while deciding the corpus. When an individual reaches a certain age during retirement there are a lot of medical expenses that need to be taken into consideration while preparing a retirement plan and deciding the retirement corpus. Medical expenses take the most part of the retirement corpus so it is very important to take all the required medical expenses into consideration while making a retirement plan so as to make investments accordingly to reap good returns in your retirement phase.expenses into consideration while making a retirement plan so as to make investments accordingly to reap good returns in your retirement phase.

RETIREMENT GOALS

Every individual has various retirement goals which need to be taken care of while preparing a retirement plan. Along with the medical expenses, lifestyle expenses into consideration while making a retirement plan so as to make investments accordingly to reap good returns in your retirement phase.

expenses, education fees etc. another important aspect of retirement is the goals that an individual has and what he is planning to do in his retirement years. For someone a retirement goal can be setting up a business while for someone else it can be going on a world tour. These retirement goals require a huge capital and hence need to be well planned so that there is no shortfall of money in the future.

Step 1: Decide Your Retirement Age

 The most common retirement age is 60 years, but it may vary from person to person. Some may wish to work beyond 60 years of age, while a few even wish to retire at 55, basically it's a matter of choice.Estimating your retirement age is an important step, because after this age your regular income stream will stop or at least reduce considerably( incase of pension) . You will have to depend on your savings and investments to take care of your retirement needs.

Step 2: Start Early To Retire Peacefully

Like any other goal, start planning your retirement as soon as possible. With several years in hand, you have time and the power of compounding in your favour.Never delay retirement planning or else you might have to compromise your goal.

Step 3: Determine Your Retirement Corpus

 Retirement corpus is the amount you require post retirement to meet your expenses and continue with the same lifestyle and maybe pursue your other personal goals.

Step 4: Calculate The Future Value Of Your Current Savings

 How much you are able to save every year, after meeting all your expenses, plays a crucial role in building your retirement corpus.After estimating how much amount you will be able to save annually towards your retirement corpus, the next step is to find out its future value.To determine this, you have to consider the expected rate of return on investment. This is the value of your savings or investments at the time of retirement.

Step 5: Cut Down On Unnecessary Expenses

 If you are unable to save now to reach the target, cut down on avoidable expenses. Some of the avoidable expenses are your weekly entertainment, impulsive purchases, dining out, foreign vacation, etc.Cutting down on such expenses can help you invest more and reach closer to your targeted corpus.

Step 6: Plan And Create An Ideal Portfolio Seeking Help Of A Financial Planner

Depending on your current age and the risk that you can afford to take, you should define a standard allocation to each asset class.It is important to have a diversified investment portfolio across the asset classes.

Step 7: Track And Review Your Plan Regularly

Your retirement plan needs to be monitored at regular intervals (at least once a year) to make sure you are on target to meet your objectives. Any changes in the income, expenses, retirement age, etc. needs to be incorporated in the retirement plan.