Retirement Planning- A Complete Guide

Imagine this- you’re nearing your 60s and living the dream with a job you’ve always wanted. Essentially, you’re doing what you love and loving what you do. But do you really want to work for the rest of your life? Of course not! But retiring doesn’t sound like a good idea either- queue the rising inflation. Unfortunately, most jobs have a retirement age, and once you cross that line, you’re out of the game. That’s exactly why it’s essential to plan for your retirement in advance. 

But here’s the thing- retirement planning is not something you can do overnight- after all, Rome wasn’t built in a day. It requires careful consideration, strategic planning, and a lot of effort. But don’t worry; you’re in the right place, as I, Janhvi Dhuria, will provide you with a comprehensive guide to help you plan your retirement. So, let’s get started!

Is Retiring Early A Realistic Goal?

So, let’s take a moment to address the elephant in the room. The decision to retire, regardless of your age, should be a choice, not a compulsion. It has to be! 

Retirement planning is preparing for the life you want to lead tomorrow. So, if you feel you’re done with the grind and it’s time to get out of the rat race, then so be it. Don’t let age be a deterrent. But that is only possible if you’ve taken time to carefully consider your options well in advance and outlined a solid investment plan for your retirement needs – aka a Retirement Plan!

Fundamental Objectives Your Retirement Plan Should Fulfil

Okay, now that we’ve tackled the critical question, it’s time to pivot to another key factor – ensuring that your retirement plan is foolproof and covers all the bases. Here are 4 non-negotiable objectives your retirement plan must fulfil.

Prepare you for Unforeseeable Circumstances

Planning for retirement goes beyond just securing your future – it’s also about getting ready for unexpected events like the COVID-19 pandemic. I personally cannot forget how it changed the world around me. Some of us faced financial struggles, while others dealt with unbelievable medical costs. By making room for an emergency corpus in your retirement plan, you can prepare yourself for such emergencies, ensuring your dreams of a comfortable retired life are not hampered by any unforeseeable circumstance. 

Maintain Your Current Lifestyle

Picture this- you’re living the perfect life. You have a fulfilling job, a healthy income, and plenty of opportunities to travel, to indulge, and spend quality time with your loved ones. It’s safe to say you’ve built a pretty comfortable and happy life for yourself, right? But have you thought about what happens when you retire? Would you be able to maintain your current lifestyle once you stop working? Likely not! Unless, of course, you made provisions for it when you had the time to, and by provisions, I mean investing for a comfortable retired life. Long story short, creating a solid retirement plan will help you enjoy your golden years without having to stress about money. Haven’t already started? Don’t worry! It’s never too late to start preparing. Just get in touch with a financial advisor. They’ll help you sort things out. Alternatively, you can do it yourself. Just make sure you know what you’re doing. The key is to start now! 

Beat Inflation

Let’s explore the potential impact of inflation on your retirement savings using a hypothetical scenario. Imagine you’re 35 years old with plans to retire at 60. You’ve calculated that you’ll need Rs. 50,000 per month to sustain your living expenses during retirement.

Now, consider an annual inflation rate of 4%. If we project this inflation over the next 25 years until your retirement, the purchasing power of Rs. 50,000 will dwindle to just Rs. 24,162. You see where I’m going with this, right?

Long story short, a robust retirement plan should incorporate strategies to counteract the impact of inflation, which involves generating inflation-beating returns.

Accounts for Leaving Inheritance for Your Children

Retirement is that phase when you finally get to kick back, relax, and enjoy the rewards of all your hard work. But hey, ever pondered what happens to your savings once you’re not around anymore? Leaving a little something for your kids can be a fantastic way to ensure your legacy lives on.

Retirement planning is not just about stashing away money for yourself. It’s also about setting things up for your loved ones. Maybe a nice little contribution for your kids to kickstart their own adventures? Or perhaps a charitable gift to support a cause that tugs at your heartstrings? With just a little planning, you can leave a legacy that gets passed down and talked about for generations. Think about it!

What Can Happen If You Don’t Plan Your Retirement?

Would a painter, a writer or an artist ever want to retire from their passion? Probably no. But that’s not a luxury those in the corporate sector can afford. For working professionals, retiring is an inevitability. 

Without a proper retirement plan, your dreams of globetrotting might remain just that—dreams—leaving you financially stressed.Trust me, the last thing you’d want is to find yourself working well past your retirement age just to make ends meet. That’s why it’s crucial to start your retirement planning today. Ensuring your golden years are genuinely golden requires early action. Remember, the sooner you begin, the better off you’ll be!

Factors You Should Keep in Mind While Planning Your Retirement

Having come this far, I’m sure you, too, must be thinking of planning your retirement. If not, there’s no better time to start than now. Contrary to general perception, retirement planning can actually be a fun and exciting journey if you approach it with the right mindset. I’ve explored some of the most critical factors you should keep in mind while planning your retirement. So, let’s dive right in!

Retirement Age

Like I said earlier, the decision to retire should be a choice, not a consequence. Think about it- retirement is not just about reaching a certain age; it’s about living on your own terms. And that’s exactly what you should do- retire when you feel ready to move on to the next chapter of your life. For me, the right time to retire is when I know that I won’t be able to do justice to my role anymore or when I no longer find joy in the work that I’m doing.

It’s important to recognise when a job has become a burden and to have the courage to step away from it. So, if you’re thinking about retirement, remember that it’s not just about age- it’s about finding the right time for you.

Healthcare Costs

Did you know that healthcare expenses are among the biggest expenses in retirement? As we age, our healthcare needs tend to increase, and it’s crucial to have a plan to cover these expenses; not an easy task if you factor in the rising medical inflation.                                                                                                                                                                                                                                                                                             Have you thought about how you will cover your healthcare expenses in retirement? If not, don’t worry. You can always start now and ensure a comfortable and worry-free retirement.

Paying Off Your Debts 

As you approach retirement age, the last thing you want is to be weighed down by debt. It’s simple logic, really- you want to enjoy your retirement years without worrying about financial obligations.

With the help of a wealth consultant, you can manage your debts like education loans, home loans, personal loans, auto loans, and credit cards and prevent them from impacting your retirement planning. 

Prioritising your debts is key- you can either start by paying off the higher-interest debts first to reduce your interest burden or begin with the smaller debts to create fiscal space. Either way, your debts should “retire” before you do.

Tools That Can Help You in Retirement Planning

Here’s a question for you – Do you think you’re saving enough for your retirement? If your answer is “Yes,” that’s fantastic! But if you answered “No,” then like it or not, you’ll have to do something about it. The good news is that there are plenty of tools available to help you get started and make the process easier. Let’s dive in and explore some of the best retirement planning tools out there to help you plan for a secure and comfortable retirement.

Mutual Funds

What if I told you there’s a simple and effective way to invest your money without needing to be a financial expert? Yup, you heard me right (more like you read it right). Enter “mutual funds!”

These investment vehicles offer a diversified portfolio of stocks, bonds, and other securities managed by professional fund managers. Not only can they help reduce your overall risk, but they can also help you generate a better corpus for your retirement. And if you’re looking for an example, check out the Equity Linked Savings Scheme (ELSS), which offers dual advantages of tax saving and wealth creation.

Public Provident Fund (PPF)

If you’re looking for a long-term investment scheme to build a financial cushion for your retirement, the Public Provident Fund (PPF) is the perfect pick for you! With a lock-in period of 15 years and an interest rate adjusted every quarter, your investment will grow steadily. You can invest between Rs. 500 and Rs. 1.5 lakhs, making it a flexible option for investors of all budgets. While partial withdrawals can only be made after 6 years, the long-term benefits of investing in a PPF are worth the wait!

National Pension Scheme (NPS)

If you’re looking for a reliable and secure way to plan for your retirement, the National Pension Scheme (NPS) is definitely worth considering. This scheme is a government-backed initiative that aims to provide financial security to individuals during their retirement years. NPS offers a range of benefits, including tax benefits and flexible investment options. With this scheme, you can rest assured that your retirement years will be comfortable and stress-free.

On a Final Note

Now that you’ve come this far, let’s envision your ideal retirement: Picture the places you’ll explore, the hobbies you’ll cultivate, and the moments of pure joy you’ll savour. Feel the financial security wrapping around you like a warm embrace. Now, with this vivid picture in mind, let’s turn it into a reality.

The journey to a fulfilling retirement starts right now, with the decisions you make and the actions you take. Remember- your future is in your hands. It’s about embracing the factors that shape your retirement, acknowledging the significance of timely planning, and leveraging these financial tools to carve out your path.

Your future is calling, and it’s time to answer. Craft a retirement that echoes with the joy, prosperity, and fulfilment you’ve earned. Also, please share your thoughts on this post by leaving a reply in the comments section. And don’t forget to, check out our recent post on “When Should You Invest in Mutual Funds?”

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Disclaimer – This article is for educational purposes only and by no means intends to substitute expert guidance. Mutual fund investments are subject to market risks. Please read the offer document carefully before investing.