Planning for your retirement years is important when you’re no longer receiving a salary or another source of regular income. Having financial security is vital for your golden years especially if you have dreams to fulfill. Keep reading to find out why saving and investing for your retirement is essential and how to go about doing it.
During retirement, you may not have a reliable source of fixed income to cover daily living expenses, unexpected eventualities such as a medical crisis, or to take vacations. If you wish to stay independent in your later years you need to plan ahead and start saving and investing for future today.
Factors such as inflation play a big role in influencing your savings or investments, causing your money to decline instead of grow. For this very reason, proper retirement planning will give you financial backup when you need it most.
Retirement financial planning is the process of accumulating a corpus to support you in your later years when you’re no longer earning an active income. It entails combining short- and long-term financial investments, giving you sufficient funds to cover costs such as daily living expenses, medical expenses, and uncertainties.
The corpus amount can be used to give your financial support should you suddenly lose your income because of a disability or death before retirement.
Planning for your retirement involves putting together a structured plan that allows you to explore your personal financial goals and understand how quickly you can reach them. Retirement planning defines the paths you need to take in order to reach your goals in your later years.
Knowing your retirement age will help you decide when you should start planning for the future. The sooner you begin investing for your retirement years, the better equipped you’ll be to handle your financial responsibilities when you retire.
The common age for retirement in India is 60 to 65 years old. Retirement age varies from person to person, with some people choosing to retire as young as 55 years old. One important factor to remember when you decide at what age you should retire is that your steady flow of income will stop or reduce considerably.
Calculating your life expectancy rate helps you to determine how many years after you retire you can expect to live. Based on the World Life Expectancy estimations, the following examples give you an indication of how many years you can expect to live to from your current age.
| Current Age | Life Expectancy | Current Age | Life Expectancy |
|---|---|---|---|
| 20 | 74.3 | 50 | 76.9 |
| 30 | 75.5 | 60 | 78.6 |
| 40 | 75.9 | 70 | 82 |
Take the example of a 40-year-old person who is expected to live to 75 years old and who is planning to retire at 60 years old. They’ll need to budget for another 15 years of post-retirement life.
Retirement corpus is the amount you need to support yourself financially when you retire. It’s the amount you need to help you live the same lifestyle you’re currently living while giving you the freedom to achieve personal life goals.
Calculating your retirement corpus entails ascertaining your current annual expenses. This involves listing all your daily living expenses as well as other costs such as medical expenses, entertainment, and children’s school or university fees. Don’t forget to factor in loans, insurance, annual holidays, and other indulgences.
Gathering your financial records and taking into account your current savings, income, and outflow of funds, you have an overview of what’s needed to support your post-retirement. Once you have these figures, you can factor in inflation costs. Knowing the future value of money helps you to estimate what you’ll need to cover your retirement lifestyle.
How much you need to retire comfortably depends on your personal requirements, lifestyle expectations, and life goals. Different professionals in the industry have opinions on how much you need. But, calculating your personal retirement corpus gives you a good indication of how much you need when you reach your golden years.
Planning early on for your retirement savings is the best advice you could follow if you want to stay independent in your later years. Knowing when you want to retire and how much you need allows you to start early, giving you more years to accumulate your retirement corpus.
Setting aside a sum of money monthly is a healthy financial habit you should start implementing as soon as possible. Automatic transfers from your bank that pays into savings or investment plans for the future is an invaluable tool to assist you in putting aside money every month. This way, you don’t spend money earmarked for your future!
If you’re battling to save now, consider reducing unnecessary expenses such as impulsive buys, entertainment, or exotic vacations in another country. Cutting down on these expenses gives you more money to invest in your savings and investments for growing your corpus amount.
Monitoring and adjusting your investments periodically ensures you stay on track with your retirement financial goals. This should be done at least once a year and keeps you updated with the changing financial market. Any changes to your income, retirement age, and current expenses should be noted and adjusted within your plan.
Choosing investments for your retirement depends on your risk tolerance, current age, and how much growth you need over a period of time.
High-risk investment options give you high returns while tackling the inflation rate.
Risk-tolerant investors benefit from potentially higher returns when investing in shares. Less experienced investors can still make high returns when investing in funds.
Investing in assets and commodities is a way of taking advantage of the inflation rate while providing a diversified investment portfolio.
Based on your risk profile, your financial advisor may recommend focusing on low-risk investment options for building your retirement corpus.
Insurance and savings plans offer the dual benefit of allowing you to put money aside for accumulating wealth while having life cover at the same time. This type of investment gives you a steady return rate which is lower than high-risk options.
Investing in bonds earns you periodic interest payments normally paid out twice a year. Bonds are issued either by the government or companies and give you a source of income without having to risk volatility associated with investing in stocks or funds.
Part of your retirement planning strategy should include a range of insurance plans that financially support you in different scenarios.
An annuity plan is a financial product that entails making a lump sum payment to an insurance company. Your money is invested, giving you guaranteed, regular lifetime payments.
Acting as a savings and investment vehicle, a pension plan is also known as retirement plans. Your premium is invested into funds or assets and on maturity of the policy, you start receiving pension benefits known as vesting.
Designed to help you with your long-term financial goals, guaranteed savings plans offer policyholders an assured return on their savings plus insurance cover.
Including medical and life insurance plans in your retirement planning gives you and your family financial support when facing uncertainties. These include unexpected medical emergencies or loss of income owing to a disability or death.
Our retirement planning guide gives you the tips you need to plan ahead for your golden years. Diversifying your investment portfolio and planning ahead as soon as your start earning an income is key to ensuring a comfortable retirement. Calculating your life expectancy, how much you need when you retire, and understanding your life goals allows you to plan for your golden years.
Saving a considerable retirement corpus means you can rest assured your current lifestyle can be maintained in your later years. Isn’t that what you want to look forward to?
Retirement planning allows you to start saving for your future as soon as possible to sustain your current lifestyle when you retire. A viable plan gives you the steps to building the maximum amount you need to be financially secure in your retirement.
Your life expectancy rate will give you an estimated number of years you need to plan for when you retire. Knowing your retirement age will help you determine how many years you need to plan for as well.
A Roth IRA (Individual Retirement Account) is the best plan for self-employed persons in India. Designed as a pension plan, the individual pays tax on monies deposited into their retirement account upfront. Future withdrawals become tax-free on retirement.
When planning a retirement budget, you need to collect your current financial records. Calculating your income plus fixed and variable expenses gives you an estimate of what your present lifestyle costs and how much you can put aside for savings towards your retirement years. Identifying sources of retirement income such as investments is important when compiling a budget.
A retirement plan advisor specializes in identifying the needs, goals, and current financial portfolio of a client planning for their future financial security. Together with risk profiling, retirement planners can structure a personalized plan for your golden years.
Knowing how to plan for retirement in your 50s prepares you for the future. Paying your debts, planning for emergencies, and refining your budget are all strategies you can implement in your 50s while improving your savings and investments for later years. Other recommendations include planning to work as long as possible and looking for side hustles to increase your regular income.
Piyush Kataria, SEO Manager at PNB MetLife, is a seasoned digital marketing strategist with over a decade of experience in optimizing websites for search engines. His expertise extends to keyword research, content strategy, technical SEO, and link building, all of which have been instrumental in driving organic traffic growth at PNB MetLife. With a strong foundation in life insurance, Piyush leverages his industry knowledge to create targeted and effective SEO campaigns.
Sakshi Malhotra is a seasoned marketing professional associated with the Life Insurance industry since 2007. At PNB MetLife, she heads Digital Marketing and Direct to Customer line of business. She is responsible for driving effective customer engagement through the company’s website and social media channels. In addition, she drives customer online buying journeys to help them buy the right product.
Disclaimer:
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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