Benjamin Franklin once said "Failing to plan is planning to fail" and it sounds so obvious for one of the most important part of our lives - RETIREMENT. Proper retirement planning considering your current standard of living, your assets and liabilities and the impact of inflation on them, will help you enjoy a relaxed life post your working years.
Use a retirement calculator to estimate the amount you would need to invest now to lead a comfortable life post-retirement. Once this amount is known you can buy a retirement policy from an established insurance provider. Today more than a dozen insurance companies offer retirement & pension plans with several benefits / flexibility ranging from single premium pension plans to regular annual premiums, lump sum payment to annuity payouts or a combination of both and many others.
Following are the 5 important things to know while planning for your retirement:
1. Compute how much you will need after retirement, taking into account living expenses, medical expenses and inflation using a retirement calculator. For example if you are 30 year old married and has basic monthly expense of around 25,000 then you would need around 1.5 lacs per month after 30 years assuming inflation average of 6% and you retire at the age of 60.
2. Begin to save for retirement at an early age and allow the magic of compounding to work its wonders. To begin with, make a habit of saving at least 10% of your income for retirement.
3. As your income increases, increase your contribution towards retirement. Gradually, as a rule of thumb, you should be saving 40-50% of your income when you hit the peak of your earnings.
4. Make a household budget and a saving plan and stick to it. Establish an automatic investment plan.
5. Don’t withdraw from the retirement corpus before retirement. This will hamper the compounding and amount to a serious shortfall at retirement.