Life expectancy is constantly going up. However, the retirement age continues to be at the older level. This combination means that you are very likely to have a longer retired life compared to the earlier generation. Moreover, our financial requirements also go up with time. The post-retirement period also needs special attention, both emotional and financial, to address the healthcare needs.
Hence, in order to make your retired life comfortable, it is important to make sure what your life goals are so that you can assess your future requirements. Once you know the target clearly, accumulating resources for a relaxed retirement age will help you and your entire family to stay financially sustained in the long run. The larger the accumulation of funds, the easier your retirement life. Hence, it is important to plan your retirement well in advance. Check out the importance of retirement savings mentioned below:
Importance of retirement savings:
The thumb rule of saving for retirement is to start investing early. When you invest in a retirement plan at a young age, your corpus generation will eventually grow significantly by the time you retire. Building a sizeable amount of retirement corpus allows you to battle the contingencies that could come your way. Take a look at these few reasons why retirement savings are essential:
• It allows an individual to accomplish his post-retirement life goals like travelling, pursuing new hobbies, learning a new language, writing a book.
• You can avail tax benefits under section 80C of the Income Tax Act, 1961 for the investments you make.
• Enhances financial security during retirement, which helps you avoid financial dependence in your old-age.
• As the cost of healthcare is constantly going up, retirement savings can provide money for your healthcare and medical expenses
• Financial dependence and cost of healthcare can be a source of stress for many. Having a sizeable retirement corpus ensures a stress-free and relaxed retirement phase
• The cost of living around us is constantly going up. Your retirement corpus can help you maintain your standard of living even after you stop earning a regular income from work
While these are the benefits of having a retirement corpus, you need to make active effort towards reaching the goal of having one. Let us understand how much you need to contribute at different life stages in order to reach there.
• When you’re young
When you are young, you go an extra mile to fulfill your lavish needs. Amidst your routine expenses, you might ignore retirement planning. While enjoying life while being young is a good thing, retirement is also a crucial phase of every individual’s life. Therefore, it should be planned in advance to ensure a stress-free life after retirement. Hence it becomes important to start channelling your money towards an appropriate retirement investment plan while you are young. During young age, make it a point to save and invest at least 30% of your income for your retirement goals.
• When you’re in the middle age
When you’re in your middle age, multiple responsibilities start piling up, which in turn, exerts a lot of pressure on your finances. Therefore, in your middle years, you should start by saving approximately 20% of your salary, initially. Further, you can increase it to over 40%-50% of your salary depending on your financial status. See to it that your retirement savings rise from 5% to 35% of the total retirement corpus in your middle years.
• When retirement is on the radar
As you near the retirement age, you no longer hold the responsibility of sending your kids for higher education. During the years just before retirement period, your children are generally settled, which eventually allows you to save more for the retirement. After you cross over 50 years of age, the rate of your retirement savings should go up to approximately 15%. Directing over 15% of your retirement savings towards retirement plans ensure that you create a generous amount of corpus to live your life peacefully after retirement.
Each individual has their own needs and financial goals. In order to reach your own goals, including your retirement goal, review your financial plan every year to ensure that you are on track. Planning for retirement with the help of an expert can also help you to reach towards the fulfilment of your life goals.