Make the most of your Golden Life
Mudit Khanna, Insoft Financial Services
You have worked hard to build a life for yourself and your family- one full of dreams and happiness. One fine day, you notice that you are going to retire from work but not life. You may have unfulfilled dreams for your post-retirement life by maintaining your day-to-day lifestyle without worrying about expenses. You may want to spend more quality time with your loved ones or travel the world. You may also want to fulfil commitments like your child’s higher education or wedding or a new start-up.
With a little retirement planning, you have the power to fulfil all your wishes while maintaining your financial independence. Retirement planning is the process of determining retirement income goals – the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, sizing up expenses, implementing a savings program, and managing assets and risk.
It is very important to calculate roughly your estimated retirement expenses post inflation to avoid any surprises later and plan your investments accordingly.
To calculate the money which you will need at retirement:
- First your average present monthly expenses are to be calculated.
- Once you get that figure, you need to derive the monthly requirement figure which will be required post retirement after taking inflation figure in account.
- Once you get the figures, one has to calculate the Corpus which will be able to deliver the monthly returns from the same.
Now comes a million-dollar question that how do we reach such a big corpus?
Start saving early and invest wisely. An early start means you will have to invest a lot less to create the same corpus compared to, if you start late. Calculations show that if a person starts saving at the age of 25 and the monthly investment per month is Rs.X, he will have to invest approx. Rs 2X, if he starts 5 years late say from 30 years.
The Process: Compare the various retirement options and plans that most competent financial organisations provide. Preferably, take help of a seasoned Financial Product Distributor who will be able to guide you through various Investment Products. A Distributor/Advisor helps you identify the various retirement planning strategies which exist and helps you review and compare them too. Set your Retirement Goals. Assess your Current Financial Position. To help you achieve your retirement goals, you need to take stock of where you are today. You must consider the risks that affect your retirement income. Keep your Investment Process Simple! That is most important. Be disciplined!
To create the corpus, start early, invest regularly, and do not dip into your corpus before you retire. Remember that if you dip into your savings at regular intervals, you might gain little from the power of compounding. This could set you behind several steps on your retirement planning. You should be an aggressive investor when young, and gradually shift to conservative products when nearing the retirement age. Taking a chance in the stock market at the age of 60 would be like going bungee jumping at the same age. Just as you would be averse to take a risk with your health, you may not want to mess with your money. So, follow the 100 minus age rule to plan for retirement. If you are 30, invest 70 percent of your portfolio in equity related investments and keep reducing this with age. This not only helps to minimize risk, but also lets you get good returns from an asset class such as equity which can give good returns over the long term.
Surprisingly large number of people find excuses never to start retirement planning. However, in absence of a good retirement benefit in India means you have to plan your investment carefully for your twilight years especially in the face of inflation, as mentioned above and rising life expectancy. No matter how daunting the debt or other spending priorities, you must save for retirement on a regular basis. It is expensive to retire.
So, cherish every moment from now on. Happy Retirement!
Views are personal: The author Mudit Khanna- Director, Insoft Financial Services from Kolkata.
Disclaimer: The views expressed are of the author and are personal. TAML may or may not subscribe to the same. The views expressed in this article / video are in no way trying to predict the markets or to time them. The views expressed are for information purpose only and do not construe to be any investment, legal or taxation advice. Any action taken by you on the basis of the information contained herein is your responsibility alone and Tata Asset Management will not be liable in any manner for the consequences of such action taken by you.
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