Imagine you are sitting in the backyard of your house while sipping a hot cup of tea. You’re 59, and there is not much on your mind except that you’ll be retiring from your job in the next 2 months. You’re happy and content with your contribution at work, but you’re also ready to enjoy life post retirement.
Suddenly, you get a phone call from your son saying that he and his wife are expecting their second child. You’re very happy, but you also realize the increase in expenditures that the family will incur going forward. You have a corpus saved, which can help your son cover any additional help he would need, but that would leave you and your spouse with no fallback. You’re someone who has always saved money for an emergency, but the increasing inflation rates have diminished the amount you have left to continue your expenses.
Now rewind the last 35 years of your life and imagine that you have just started your career. You know that you need to plan for your retirement, which is the first step to your financial planning. You want to be secure and not worry about cutting down on your expenses in your 60s and beyond.
Life planning is the first step towards financial planning. Your dreams, achievements, and happiness should not end with your retirement; instead, post retirement life should be another interesting chapter in your life.
New goals need backing, and retirement planning allows you to achieve those. You may want to spend more quality time with your loved ones or travel the world. You may also want to fulfill commitments like your child’s higher education or wedding.
So, to begin, what exactly is a retirement plan?
Preparing today for your future life, which would allow you to meet all your goals and dreams independently. The first step in planning your retirement is to determine your retirement goals, estimate how much money you need to save, and invest that money.
Create a retirement plan that is unique to your needs and goals. Simply put, retirement planning includes estimating your expenses during retirement, accumulating a sufficient corpus, and investing it in such a way that it covers the expenses.
Why do you need one?
You retire from work, not life. You may have a new set of dreams for your post-retirement life. At the same time, you may also want to maintain your day-to-day lifestyle without worrying about expenses.
By planning in advance, you can define the path to achieving these life goals without any financial dependence.
How can I build one?
Before choosing a plan, you must, first, identify your needs and goals. If you have some years until retirement and want to build a corpus, you can go for a retirement savings plan. If you are nearing retirement and have some funds to invest, you can choose a retirement annuity plan.
If you invest in a retirement savings plan, you get a lump sum amount as your retirement fund on maturity. You can invest the entire lump sum amount or a part of it in an annuity plan to get a lifelong, regular income.
When to start?
In most cases, the minimum age for entry into a retirement plan is capped at 18 years, while the maximum age is around 70 years. However, these can differ depending on the plan you choose.
Premium: Retirement plans generally allow you to choose the premiums you want to pay towards your plan, as per your requirements. A higher premium may lead to a higher income during your retirement.
Vesting age: The vesting age is the age at which you can start receiving your pension or income from the plan. The general vesting age is fixed at 40. However, this may vary depending on the plan you choose.
What to keep in mind?
- You should monitor the funds invested regularly
- Change investments closer to retirement- Choose low risk options when nearing retirement
- Discipline is important for living your life the way you want.
Start early. If you haven’t done this earlier, you should start immediately
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