June 23, 2020 by Research Team
Start planning for retirement from the day you start earning- is certainly the best advice given, but is hardly ever followed.
Retirement is one of the most significant phases of our lives.
Sensible financial planning during your working years can help you realize the dream of a happy and comfortable retirement.
Here are few tips you can follow:
If you have just realised that you need to plan for your retirement, start saving and investing as much as you can now.
Tip: When young, you can grow your money considerably with the power of compound interest. In such investments, the interest is paid on the principal investment and the accumulated interests of previous period.
You should take into account the rising inflation to build your retirement corpus.
So each time, you get a raise, increase your retirement savings too.
Tip: Few plans have the option to increase the amount automatically- once half yearly or annually for an amount of your choice eg. Rs. 1000 or Rs. 2000 increase every month there on. Do consult a financial advisor for more such options.
Your investment portfolio should be according to your age, risk appetite, liquidity, inflation, liabilities and goals.
Diversify your savings in various categories to optimise returns.
Tip: At the age of 50 you should revisit your retirement portfolio and check the allocation of your investments.
Health insurance plan by your employer will cover you only till you are employed with them.
It is always better to buy personal health insurance plan including your spouse for lifetime benefit.
Tip: Low premium, no worry of pre-existing illness waiting period, adequate cover and tax benefits are few advantages of buying a health plan when young.
It is easier to save for retirement when you don’t have any student debt or credit card debt.
If you are living on rent, major share of your income goes towards rent.
Having your own house will give you a sense of security and reduce your expenses considerably.
Tip: You can consider buying a retirement home in some other city or your native place where prices are within your budget.
Loss of the sole breadwinner can risk the survival of any family.
Therefore it is essential to create financial security for your family by investing in a life insurance plan.
You should avoid spending the retirement corpus so that your money can gain from the power of compounding.
Tip: At the time of job change, rather than withdrawing your PF balance, you should transfer it to the new employer account.
Other options of withdrawing for specific purposes such as buying or building a house, your child’s marriage, or in medical emergencies should also be avoided.
Your retirement fund should not be used for meeting contingencies.
Build a separate contingency fund which should help you meet expenses of at least six months.
After retirement, you can use this fund as per your needs.