Start Your Retirement Planning With These 6 Useful Tips
Retirement planning is not for those who have retired, in fact, it is for the fresher who has just got a job and has started earning. Of course, the young people are a little apprehensive about planning for retirement and may laugh about it. They love to spend at this age, and there is no pressure of old age issues for them. However, one has to spend carefully, even at a young age where there are no pressures of any kind.
Following are some of the tips that need to be followed for retirement planning which will help you live better and live happily without being a burden on anyone.
1. Save 10%-20% of your income
The very first thing that you should consider is to keep aside around 10%-20% of the income every month. This forced saving will further help you see a large amount during the retirement years. Suppose a 25-year-old person saves a fixed amount every month, the savings in five years will be 44% of total corpus when the person turns 60. The early you start, the smaller is the amount you need to invest. However, the older you grow, the amount will be halved as you need to save more with almost 20 to 25% savings of your income.
2. Increase in salary means an increase in investment
After a year, when your salary increases, you should also increase the saving or investment as well. Of course, you have to take into account the inflation and other factors too. Based on your needs and lifestyle, you will definitely have to increase the savings. If at the age of 28, the salary is around Rs. 50,000 and the saving is Rs. 5,000 per month, the total will equal to 92 lakhs by 60. So if there is an increase of 10% every year the savings should also be accordingly. This means by 60; the person has around 2.76 crores.
3. Don’t touch corpus
This is an important tip. Everyone thinks it is not necessary to keep aside such a large chunk of money when you really need it. When you withdraw any little amount, it will certainly have the effect of the compound, but the same amount can do wonders when you retire. Most people are impatient and reach out for the corpus, which can damage the retirement plan. Even when changing the jobs, you should transfer the PF and not withdraw them or use them.
4. Education and retirement connection
A parent always thinks of saving for their children instead of their own retirement. Of course, there are various needs for their children to be fulfilled such as education, wedding etc. This also shows the picture that they are not really aware of their own needs and spend all of it on children. Dipping into the retirement fund for the needs of children is going to be risky. The best thing here is to get a education loan. Loans today are easily available for education . Even the EMIs are going to be easy to pay out. So instead of tearing the PF, get the loan.
5. Get rid of loans
Before you retire, you should get rid of all the loans and plan for it accordingly. You should not look at the corpus for repaying the loan. This will definitely wreck your entire retirement plan if you take out a large chunk out of the savings.
6. Determine how much you will need
Of course, it does differ but get ready for more. The inflation and other sudden expenditure will definitely affect the savings. So be ready for emergencies as well. Suppose your current age is 30 & your monthly household & lifestyle expenses is 25000 then your future value would be 190000 pm after 30 year. (assuming 7% inflation) So you need to accumulate total corpus of Rs. 5 Cr.at the age of 60.
People usually fail to plan their retirement due to lack of financial knowledge and emotional biases in managing their own money. It’s strongly recommended to visit a financial planner to get a comprehensive financial plan made for you and your family.