RETIREMENT PLANNING-1

Retirement is one of the most important life events all of us will ever experience. From both a personal and financial perspective, realizing a comfortable retirement is an incredibly extensive process that takes sensible planning and years of persistence. Even once it is reached; managing your retirement is an ongoing responsibility that carries well into golden years.

While all of us would like to retire comfortably, the complexity and time required in building a successful retirement plan can make the whole process seem nothing short of daunting. However, it can often be done with fewer headaches (and Financial pain) than you might think – all it takes is a little homework, an attainable savings and investment plan, and a long-term commitment.

WHY PLAN FOR RETIREMENT?

Before we begin discussing how to plan a successful retirement into our own hands in the first place. This may seem like a trivial question, but you might be surprised to learn that the key components of retirement planning run contrary to popular belief about the best way to save for the future. Further, proper implementation of those key components is essential in guaranteeing a financially secure retirement. This involves looking at each possible source of retirement income.

Most of us like to live in the present, so much so that often, we end up ignoring the future. We splurge on present needs and retirement planning to most of us is something esoteric that is best relegated to Wealth Management magazines.

Old age comes with its own share of problems. As a person grows older, his regular source of income dries up, his dependency on others can increase significantly. Due to latest medical technologies coming in the reach of common man, the longevity is increasing with each passing day. With health care expenses on the rise and little social security, living the golden years respectfully can be quite a challenge for senior citizens. In such a scenario, regular income streams that can help them meet their financial needs and maintain their current living standards.

Some of the common needs of a person during his retired life:

1. A regular income flow to maintain the required standard of living.
2. Funds for emergencies (like accidents, chronic sickness).
3. Adequate insurance (health insurance, death benefits, etc.).
4. Resources for large capital outlays (purchase of residential accommodation).
5. Leaving estate for heirs.

To arrange for the above mentioned needs a proper thought should be given to their Retirement Planning.  It is rightly said that…. “It is not what you earn, but what you save, that matters in your retirement”.

 

The important check points to be considered in Retirement Planning are:

1. Determining Retirement Objectives: usually people need 50 – 75 % of their pre retirement last drawn income, to fund their post retirement expenses.
2. Financial Independence: It is an important factor to make retired life enjoyable and to be self sufficient throughout the lifetime.
3. Minimizing Taxes:  So that the retirement corpus does not get shrink by tax liabilities and further it is invested in such instrument that fulfill the post retirement needs, yet doesn’t increases the tax liability.
4. Wealth Transfer: For rich and wealthy individuals, it is necessary to draw a path for transferring of their wealth to their legal heirs with minimum tax liabilities.
5. Estimation of Post Retirement Expenses: after taking into account the effect of inflation and Interest Rates.
6. Retirement plans provided by employer: Most people have jobs and they hope to retire comfortably some day. Many companies offer retirement plans such as Employee’s Provident Fund, Employees Pension Scheme, Gratuity etc. or pension plans or other types of retirement plans.
7. Social Security measures available: Though social security measures are not available in India but we can name the few schemes as examples, The Employees’ Deposited linked Insurance Scheme, 1976, Maternity Benefits Act, 1961, Old Age Pension Scheme etc.
8. Insurance cover needed:  Adequate insurance cover is also needed for retirement planning.
9. Health care and emergency requirements: A provision for emergency needs and suitable health cover is required for effective planning.
10. Changes in lifestyle: In retirement planning one should plan for life style changes in advance and should adapt to change in line with the needs.

1. Retirement age and life expectancy: it is a very interesting to assess or determine the age at which you want to retire and compare your life expectancy after retirement. The trend generally is showing that the earlier you retire, the longer your life expectance is. But everybody dreams for early retirement.