Whatever the choice, planning for retirement is important so that you can retire without financial worries. Whether you are settling abroad or in India, you need an adequate retirement corpus to fund your living expenses and medical bills. As such, when you are working, you can start building your retirement fund, one step at a time, to create a good corpus by the time you actually retire.
When planning for retirement, though, some things should be borne in mind for drafting an effective plan. Let’s understand what these things are.
Things to remember when planning for retirement
1. Time to retire and life expectancy:
Time to retire is basically the age at which you want to retire. For instance, if you are 35 currently and you are planning to retire at 65, the time to retire would be 30 years.
Estimating the time to retire would help you assess your investment horizon so that you can choose suitable investment avenues. Life expectancy is the maximum age up to which you expect to live. This would help you understand the number of years your retirement corpus should last after you retire. For instance, if you retire at 65 and you expect to survive till 75, your life expectancy is 10 years and you need a retirement fund optimal enough to meet your expenses for the said duration.
Estimating life expectancy correctly is a challenge as life is unpredictable. So, its better to assume that you will live till 99 or 100 years of age and plan accordingly so that the retirement corpus doesn’t fall short.
2. Place to retire:
Place to retire is the country and city where you would live after you retire. This is an important consideration since the living expenses, inflation and medical costs vary across geographies. For instance, retiring in the USA would be more expensive compared to retiring in India. Even in India, retiring in a metropolis like Mumbai or Delhi might be more expensive than retiring in a Tier II or Tier III city.
Knowing the place to retire would help you build up a suitable relocation nest with which you can fund your retirement home.
3. Inflation rate:
Know the inflation rate of the country you wish to retire in. Keep it under consideration when planning the retirement fund. Find out what would be the average living expenses 20 or 30 years later when you retire after factoring in inflation. When you know the expected expenses, after inflation, you can build up an optimal retirement corpus which would be able to meet the inflated expenses.
4. Retirement goals:
Assess your goals after you retire. They can be taking a world trip, buying a luxury apartment, or ticking off items on your bucket list. Based on these goals you can estimate the retirement corpus you would need.
5. Risk profile
Know your risk profile, i.e., whether you are tolerant of investment risks or you want to avoid them. This would help in choosing the right investment avenues which align with your risk preference. Moreover, as you grow older, it may be preferred to switch from risky investment avenues, like equity, and move towards safer avenues, like debt, to protect the corpus accumulated and the returns earned thereon.
6. Exchange rate
If you are planning to return to India or move to another country after retirement, keep the exchange rate in mind as your corpus would be converted into another currency.
How To Plan For Retirement?
Keep the aforementioned points in mind when considering a retirement plan. Some retirement planning tips may include –
1. Start early –
Start saving early so that you can save affordably and the long-term horizon would add to the corpus through compounding of returns.
2. Save systematically –
Save in a disciplined manner, regularly, to create an optimal retirement corpus. Do not invest haphazardly. Make savings and investments a habit and follow it regularly.
3. Invest in suitable avenues –
Choose suitable investment avenues to plan your retirement corpus. Deferred annuity helps one lock the future annuity rates at current date and thereby financially secure their retirement goals. Moreover, annuity plans allows annuity payments which can create a source of regular and lifelong income after retirement.
4. Diversify your portfolio –
Portfolio diversification can help you spread out the investment risks and enhance the return potential of your investments. So, invest in equity and debt instruments and create a good mix of investments.
The bottom line
Retirement planning is no rocket science. All you need is a little understanding of your preferences and goals. Start your retirement planning today to build up a suitable nest egg for a financially independent retired life. For securing lifelong incomes, a life insurance pension plan might be a suitable choice. You can choose a deferred annuity plan and save up for retirement. Moreover, if you choose a ULIP, you can diversify your investment across different funds and earn market-linked returns.
So, use the points discussed above and start your retirement planning journey without delay.
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