Why Should Retirement Planning Be On Your Priority List?

 

How long will you postpone retirement planning? You may be around 25 to 35 years of age, but you must set aside money for retirement. Time flies and once you reach the 50s, you’ll hardly have the time and resources to plan a happy retirement.

You want to have an independent and fulfilling retired life. You wouldn’t want to depend on your children in retirement, for money. You need a robust retirement plan to enjoy a happy retired life.

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Why Retirement Planning Should Be On Your Priority List?

 

Ask yourself, when you would want to retire. This is the first step of retirement planning.

 

Why is retirement planning important?

 

1. Retirement planning is important to retain financial independence and maintain a comfortable lifestyle after retirement when you are no longer earning.
2. You cannot work forever. Yes, you might still want to work in retirement to keep yourself occupied. But can you rely on the little income you get?
3. You might want to go abroad next month. Will it be possible if you don’t work on it? Similarly, you might think of having a great retired life. That’s not enough. You will have to actually save and invest money regularly to achieve your goal.
4. The future is uncertain. You never know when emergencies show up. Will you be in a position to work in your retirement with the same energy and efforts as now?
5. With growing age, you are bound to have health problems. If you haven’t saved enough for retirement, medical expenses will make a huge dent in your savings.
6. Inflation is not under your control. The value of Rs 50 Lakhs will be much lower in the future. Even in retirement, you will not be free from responsibilities. You might want to take vacations. You might have to get your children married. You will surely want to leave some property or asset behind for them. You need money for this.
7. All your working life, you’ve been working hard trying to make ends meet. You save, invest and provide for your family. Retirement is the ideal time to tick off your bucket list. Again, you will need money to fulfill your wishes.

 

SEE ALSO: Types of Retirement Plans

 

Retirement planning tips:

 

1. Start today. Out of whatever little you earn in your young age, make it a point to divert some money for retirement.

2. Do not dip into your retirement savings. Retirement may seem far away, but it demands equal financial security. Therefore, do not dip into savings, instead increase contributions.

3. Consider inflation. Say you spend Rs 5 Lakhs a year now when you are 30 years away from retirement. How much will you need after 30 years to maintain the same standard of living? Consider inflation @7% per year.

 

Use this formula to calculate how much you need to maintain the same standard of living after 30 years:

FV= PV (1+r) ^ n where

FV= Future Value

PV= Present Value

R= Rate of interest

n= Number of years for retirement

FV= Rs 5,00,000 (1+0.07) ^ 30

FV= Rs 38,06,127.52

Therefore, you will need approximately Rs 38,06,128 a year to maintain the same standard of living, 30 years from now.

 

4. Increase your retirement savings each year. Every year you get a salary hike. But, the hike is eaten up by inflation. Also, with increasing income, your standard of living also increases. Therefore, be sure to curb unnecessary expenses and divert the same money to retirement funds.

5. Do not rely solely on social security schemes. Currently, EPF offers a good rate of return. It currently offers 8.55%. But, is it enough for retirement?

6. Calculate how much you need and choose investments wisely. VPF is an extension of EPF. You’ll earn the same rate of interest as EPF. PPF also gives good returns. Therefore, make sure you invest in other retirement schemes.

Conclusion:

 

Your retirement is in your hands. Therefore, plan well and live well! There are a number of retirement plans in India which help you save, invest and plan for retirement.

 

Be Wise, Get Rich.