Why Retirement Planning is important? When we ask about the life after retirement, some people answer this very casually, they have not even thought about their life after retirement. This type attitude is not good; everybody must agree one fact that, retirement is a reality that will happen today to tomorrow. In any case, you can’t escape from this. Everyone grows old. It’s inevitable. The question is, will you be ready when retirement gets here? We all know it’s coming, but unfortunately, few of us are adequately prepared for its arrival. There are several things we can do to prepare for retiring, even if that important day is far away. The relevant question here is, how you will live after your retirement ? What will be your main source of Income? Whether the money you saved is enough for the rest of your life? How you are going to fund for any unexpected contingencies? What sort of help you expect from your children?. The only one answer for all the above questions is to plan for retirement well in advance and start savings according to the plan and predefined asset allocation to achieve the retirement/financial goals. a) The first step in the retirement planning is to decide your retirement age i.e, at what age you wish to retire in other words how many years you have to work until you are ready to retire. The longer you have to save and invest before retiring, the better off you will be. b) Review your budget carefully to get an idea of how much you are likely to spend in retirement. You need to consider so many aspects while reviewing your budget. c) Prepare an estimate of your retirement benefits which you are going to receive from your employer as retirement benefits also the expected amount of monthly pension. d) Estimate how much of a monthly shortfall you are likely to have between the retirement benefits you will receive and what you expect to spend in retirement. Before retiring, you should strive to save enough to meet that shortfall. e) Use a retirement calculator to determine how much you will need in assets to generate the monthly income you expect to need in retirement. If you search in internet you can find free retirement calculators in various websites f) Use the number of years until retirement as your guideline when choosing your investment mix. Never invest money in the stock market, Sector specific mutual fund schemes or similar risky financial instruments that you expect to need within the next three to five years. You might be some times forced to sell these investments at a loss, if the market is down at the time need the money. So avoid investment in risky assets for short term. g) Invest money you expect to need within the next five years in safe investments, such as Mutual Fund schemes investing in bonds and government securities, government bond or other public sector company bonds, bank term deposits etc. Those money require after five years can be invested in direct stock market (selected performing stocks with expert advice), Equity based Mutual Fund Schemes, Company FDs, Commodities like Gold, Silver, Post Office Savings Schemes like, Post Office Monthly Income Schemes, National Savings Certifies, Public Provident Fund (PPF) etc. When you select Mutual Fund Schemes, select schemes having a minimum 3-5 years consistent performance track records and also avoid investing in NFO (New Fund Offers) h) Keep sufficient money liquid in the savings bank accounts or other liquid schemes for contingency purposes. i) Invest in good selected Retirement Insurance Plans. i) Invest in good selected Retirement Insurance Plans.
Posted on: Sun, 04 Aug 2013 12:26:59 +0000
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