Preparing for your finances beforehand is wise and customary. Achieving a comfortable retirement is a very important event for majority of people, not only from a financial angle but also from a social and psychological one.
Why Plan for Retirement?
There are many things you need to think about when you are nearing retirement such as how you will manage the remainder of your life and you would also want to leave behind your children certain benefits in the form of inheritance to ease problems in their life.
A person, currently earning Rs. 500,000 annually, does not anticipate the same level of income once he retires. Therefore, it is obligatory for him to plan beforehand so once he retires; he has ample money to manage any kind of expense after retirement.
Employees are mostly provided with retirement options through their employees called ‘Retirement Benefits Plan’ such as employee provident fund, gratuity and superannuation. However many people do not have opportunity to plan for retirement at an early phase probably due to shortage of resources, lesser knowledge, personal commitments or other reasons.
With the increasing worries for social and financial security, retirees need to effectively plan their retirement so that they will not end up depending on anyone else. Here are five steps to effectively plan for retirement:
- Analyze your current financial position
- Calculate your retirement objectives/needs
- Select a retirement plan
- Determine your asset allocation strategy
- Review your retirement plan annually or at regular interval
To get the maximum from your upcoming life in retirement, it’s looked-for that you plan for it well in advance.
Step 1: Start Saving Early
The sooner you start saving for retirement the more you will have to spend after retirement. Most employers will offer certain retirement benefits, it is important to take advantage of these from an early age. When you start out with a new employer, you often have a choice about whether or not to join a pension or savings plan. You may even have the choice of two or more different plans. In many cases, they are an important part of the total payment your employer gives you. Yet many people don’t give them much thought. You should try to benefit from these plans if it leads to a drop in income in the short run. Where employers do not provide these benefits, investing in Voluntary Pension Schemes (VPS) from a young age can be of great benefit to you.
Step 2: Plan Your Retirement
Knowing what you want from life after retirement can be a good feeling but knowing what you require to get there can keep you much more satisfied. It is good to have a figure in mind after which you can think about retirement. For example, let’s say you feel that you are ready to retire once you have Rs. 1 million in savings and a house of your own then work towards achieving these goals before you retire.
Step 3: Invest Your Money
Just because you are retired does not mean that you should finish all the money you have saved during your life time. Returns received from your investments can provide you with a substantial amount of money to not have to rely on the initial fixed amount. Diversify your investments between investments that provide are safe as well as to slightly risky investments that provide higher returns. Equities or Commodities and Mutual funds may be the way to go for you.
Step 4: Follow Your Goals
Keeping a follow–up for the plans, especially starting them out at an early age might not seem like an easy thing to do but the more you do it the easier it becomes. Follow your identified goals and live a happy retirement life the way you want rather than being a burden on someone else.