With so many exciting things to plan and ponder over in one’s youth, it may be natural for retirement planning to take a backseat for millennials. Busy with building their careers and pursuing their passions, millennials may look at retirement as a distant phase they need not worry about.
However, it may be crucial to realise that retirement planning is not just for those nearing retirement but may also be important for those far away from it. The sooner one begins planning for their golden years, longer the duration one may have to build a more substantial retirement plan.
But despite understanding the importance of retirement planning, you may not know where to start. Fortunately, we are here to help you. Here’s a brief guide on what you should know about your retirement strategy.
What is Retirement Planning?
Retirement planning, whether for millennials or otherwise, may involve setting up financial goals and preparing for a period in life when one may not be working anymore. As there may no longer be a regular source of income (such as a salary), one may need to create financial strategies early on and plan for alternative income sources to support retirement.
Establishing these sources of income in the later years may be achieved by saving and investing correctly, where products such as annuity plans may be a suitable fit. Annuity plans are life insurance products with a retirement component. An Annuity plan is a financial product that provides you fixed amount of money in return for a lump sum investment. This may be suitable for you if you have financial dependents to look after as well.
You may buy an annuity and pay premiums for a fixed period. Then, once your retirement begins, you may start receiving pay-outs at the frequency of your choice. Out of the two types of annuity options available, deferred and immediate, millennials may find the former more suitable, as it is their earning phase. In a deferred annuity plan, the pay-outs may be paid out after a substantial amount of time. In an immediate plan, the pay-outs may start coming in within a short period of purchasing the plan.
If retirement may be distant for you yet, a deferred annuity plan may seem more feasible.
Benefits of Retirement Planning for Millennials
Now that you may have some idea about retirement planning and annuity plans, let’s look at what you should know about your retirement plan’s benefits.
• Longer Time one gets to Accumulate/Generate Wealth
One of the vital benefits of retirement planning for millennials may be the long period one gets to accumulate/generate wealth. Even with the low premiums, you may be able to secure a high-value retirement fund for yourself and your family, because of a longer timeframe in hand.
You may also want to consider investing in market-linked annuity plans if the risk relating to market fluctuations are acceptable for you.
• Supporting Dependents
As a young person, you may or may not have any dependents currently. However, as you form your own family, there might be a chance that the number of people depending on you financially may increase. With the right retirement planning, you may be able to create a secure financial life for yourself and your dependents.
Important Things You Should Know About Retirement Planning as a Millennial
Retirement planning for young adults may become easier if one has well-rounded knowledge about the same. With this context, here are a few more additional things you should know before you start your retirement planning strategy:
1. Define what your retirement life may look like –
Only when you have a clear vision of what you want your retirement life to look like, would you be able to make that vision into a reality. Understand the costs of your ideal retirement life, and then go ahead making it a reality.
2. Do not ignore the uncertainties –
Dealing with an unfortunate and untimely event may not be a part of your plan. But when the time comes to do so, prior preparation may come in handy. Hence, insurance coverage may be paramount.
3. Reassess your risk appetite –
As a millennial, you may have a long time before your retirement. As a result, you may want to consider reassessing your risk appetite at periodic intervals. This would help in accommodating and planning for the ever-changing external circumstances and making suitable investment decisions.
4. Take advantage of product features –
What you should know about your retirement plan is that it comes with different features to choose from, such as, premium payment options, payout options, joint life insurance coverage options (where your spouse may also be considered as the life insured) and so on. Consider your current and future finances and choose an option that may suit you the best.
When attempting to plan for retirement as a millennial, you may want to consult a financial advisor to understand what may work for you in the long run. Keep in mind that by starting retirement planning early, the benefits may become more substantial.
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