A wise man once said – retirement is not the end of the road but the beginning of an open highway. But what if you don’t have enough money to pay the toll?
Retirement may feel like a long way off when you’re young. Financial planning, on the other hand, is super important if you wish to retire with dignity. Whatever your dream retirement looks like, whether it’s a relaxing time at home with family and friends or an adventure-filled trip around the world, you’ll need money.
So how do you find out how to save and how much to save? It’s no rocket science. You do it with retirement planning, the term that every retirement advisor, accountant, and mid-aged buddy keeps talking about!
But how do you start a conversation around retirement planning?
- A retirement investment plan covers everyday expenses and medical costs and helps fight inflation.
- Paying off debts before retirement can prevent financial insecurities.
- A retirement calculator can determine the sum you need to live an easy and independent life in your post-career phase.
- An important aspect of retirement is to have fun instead of constantly worrying
Ask Yourself This
Retirement planning may seem like a complex task, but it can be a cakewalk if you know where you’re going. To get started, you need to ask yourself a few questions.
First, why do you even need retirement planning?
Let us answer this for you. With a structured plan, you become equipped to handle several factors, including surplus, shortfalls, and emergencies. Not just this, but retirement planning will also help you understand how quickly or how likely you are to achieve your retirement goals.
Okay, that was too complex! We mean to say that retirement planning lets you develop a broad understanding of your life goals and defines the path to meet them.
So, why should you plan finances for retirement?
As long as you’re earning a monthly salary, it might be easy to cover your expenses and afford the lifestyle you want. But post-retirement, having enough money is super important to maintain a good lifestyle.
Cover Everyday Expenses
It’s not as if someone else can take care of your bills after you retire; you’ll have to endure them yourself. Life moves on, and the absence of a monthly income could become your biggest nightmare.
Don’t worry! You can still have a good night’s sleep if you know the best investment plans. But when salaried people already get retirement benefits, why does retirement planning even matter?
Unfortunately, no. Not every working individual gets pensions or gratuities, and even for those who do, the sum is often insufficient to meet all the expenses.
This is exactly why building a considerable retirement fund is essential so that you can continue living the life you love.
Did You Know?
Despite the shock of COVID-19, assets in retirement saving plans continued to expand in 2020, surpassing USD 56 trillion globally at year’s conclusion, an increase of 11% over 2019!
Cover Medical Expenses
As you age, your health issues increase too. In fact, retirement itself can trigger a lot of emotional responses, most of which you might not be prepared to deal with. Especially when it comes to healthcare expenses arising from it.
We live in a country where healthcare costs seem to be going by the minute. So how do you prevent creating a hole in your pocket? By building a retirement fund!
The last time we saw prices crashing down was for gym memberships during the pandemic. Nothing else has ever become so cheap so quickly for as long as we can remember.
You see, the prices of goods and services are increasing, and they will continue to go up without fail. Inflation can truly mess up your purchasing power. From groceries to travel, everything is going to cost you more as the years pass. But with a sound retirement plan, you can continue living your life without worrying over hiked prices.
What Do You Owe?
It may sound dramatic, but getting out of debt and paying off your liabilities is closely linked to your overall happiness. Let’s face it; your life isn’t much fun when you’re in a financial crunch each month and struggling to make repayments.
Why are we talking about this? Because you should consider your debts and liabilities when thinking of retirement investment.
While retiring with debt is considered a cardinal sin, prioritizing debt reduction before saving for retirement can shortchange your nest egg. The best way is to pay off your debts before entering the post-career phase.
So, what are we really asking you to pay off?
- Pay off your mortgage
- Get rid of the car loan
- Pay off credit card debt
- Eliminate student loans
Let’s assume you fail to pay off one of these. Is it ever okay to retire with some debts? No. It is not. This can lead to financial insecurities. But we also don’t mean that being unable to pay off debt before retirement is the end of the world.
The main thing is to focus on your finances early in life to make the most of the money you do have.
Besides everything, if you are a smart strategist and have a plan to overcome your debt, carrying some of it won’t derail your plans.
How Will You Embrace the Change?
Change is unavoidable and dealing with it is rarely simple. Life seems to be changing a lot faster as you get older. Children leave home, you lose touch with friends and family members, health issues grow, and then there’s the R word – Retirement.
It’s natural to experience conflicting emotions in response to these changes, just as you did from youth to adulthood. But, like everything else, you will get used to a new phase in your life and begin to enjoy it.
Change your mindset – Consider retirement more of a journey than a destination. Give yourself plenty of time to think things out —you can always change your mind later. Focus on what you’re getting instead of what you’re losing.
Develop resilience – You’ll be better able to deal with retirement if you’re more resilient. You can develop this skill at any age to maintain a positive perspective when life gets challenging.
Make new objectives – You may have already reached many of your professional milestones, but it’s crucial to continually set new ones for yourself to work toward. Setting objectives can make you feel energized, give you a sense of purpose, and reaffirm your identity.
Do You Need a Bigger Retirement Fund?
When you’re confused about retirement investment plans, you may also worry about needing a bigger retirement fund.
Unfortunately, there is no such thing as a one-size-fits-all retirement fund. Depending on the retirement age, you can arrive at a figure by factoring in monthly expenses and inflation costs.
Alternatively, you can use a retirement calculator and figure out the cover you’ll need.
Step 2: Revisit Your Investment Plan
It’s time to rethink your retirement strategy once your children have become independent. Your day-to-day expenses are likely to be lower now. For example, you may not be spending as much on groceries or your children’s extracurricular activities. You wouldn’t need to put money aside for their education any longer.
Any of these adjustments can put you in a better position to concentrate on your retirement funds.
Step 3: Have Fun!
Paying off your debt and choosing the best retirement plan is essential, but that doesn’t mean that you lose out on all the good parts. Indulge in retirement planning to secure your financial future, but don’t forget to make memories and live life to the fullest. You’ll have so much time. Spend it just the way you want to.
Finally, focus on the silver lining and congratulate yourself on becoming one of the few people who are happy, even on Mondays.
You’re Retired. Hello Pension. Goodbye Tension.
Word to Remember
National Pension Scheme – National Pension Scheme is sponsored by the government. It was first launched for government employees but is now open for all sections of people.
Pension is not the sole tool in a retirement shed. There is a high chance that most pension schemes will not offer enough money to fully cover retirement needs. For this reason, you should also consider retirement investment plans.
A few important things to focus on before retirement include –
Increasing cash reserve
Diversify your investments
Estimate how much money you’ll need after retirement
A person working in a private company should retire by 58, whereas government employees retire by 60.
Some of the best pension plans in India are National Pension Scheme (NPS), whole life ULIPs and Pension Funds.
One of the major parts of retirement planning is paying off your debts. While you can carry your liabilities to the post-career phase, it can lead to financial insecurities.
Read more about Retirement Age in India.