Every person wants a peaceful life after retirement. So let us plan for this from now.
We all living in a world where we work for nearly 8 hours a day and 48 hours a week.
Most of the people won’t have any perfect retirement planning.
Well, it’s the right time to think about your retirement and ask yourself the following questions.
Do I have enough money when I retire?
You must have envisioned your life post-retirement sipping cocktails on a porch, relaxing on a cozy mountain treat.
Else, you may go off to travel the world and after all, just like there’s happily ever after in every movie and everything.
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However, that is not the case in real life for most people. It takes careful financial planning to fulfill your aspirations post-retirement.
To make your retirement life more pleasant, retirement planning should be on your priority.
To start with, you should understand that your savings and investments should be structured to fit your lifestyle preferences and desires.
It is also true that during the early part of the last decade, people used to think and talk about retirement planning only in their early 50s.
However, lately there has been a drastic change on that front, and many people have started investing and planning early for wealth creation and financial security.
How to Plan for Your Retirement?
Above was the question, Do I have enough money for my Retirement?
It’s practically a tough question to answer, isn’t it?
One of the simplest ways is to calculate your current monthly spending multiplied by the total years of your retirement.
This will return your retirement corpus say at the age of 50.
Only a few people retire from their employment comfortably by having a decent corpus.
This is due to the lack of awareness among the people towards retirement planning.
In developing countries like India, still, aged persons are going for work to lead their life.
So in this article, I am going to explain to you the best retirement plans for your future.
Three Main Challenges in Retirement Planning:
Not all the retirement planning will end comfortably as there are a few challenges that need to overcome.
1.) As we all save some money for our future, but do you think that is it equal to inflation.
Because the currency values are changing every day and we need to invest our corpus that will grow aggressively.
2.) In the age of retirement, will our corpus assure our regular monthly income to be continued for?
That’s another challenge that has to be planned well for better retirement planning.
3.) The third is a probability of our saving and spending ratio in the ages of our retirement.
Whether the money drawn from the corpus is equivalent to the money invested in it (is it balanced)?.
These are the few challenges you may encounter when planning for your retirement.
The retirement planning should start from day one of your job (or) work. Most people don’t follow but it’s necessary.
Your retirement planning should be as early as possible for a better comfortable retirement.
Experts say $1 million is enough for a comfortable retirement but that’s not the fact for everyone.
Normally, it should be around 80% of your current annual income level to meet those benchmarks and to continue your current lifestyle.
Stages Of Retirement:
Adulthood (ages 21 – 30):
Adulthood is the best age to start your retirement planning as you have ample free flow of money to invest.
Your investment will grow more as long as your investment periods will be.
You will have enough space to compound your investment where interest earns interest.
For example, if you invest $100 per month, the ROI will be three times when matured than starting at the age of 45.
Early Midlife (ages between 31 – 45):
Early Midlife brings more financial commitments in your life.
This includes mortgages, student loans, credit card debts, marriage loans, car loans, and personal loans.
Your salary is more or less will be spent only on paying EMIs and satisfying commitments.
You people at this age will have to work more to save for your retirement.
Later Midlife (ages between 46 – 60):
Later Midlife gives you some freedom from hectic financial commitments.
At his age, you may have settled most of your aforementioned expenses like mortgages, credit cards, loans, etc.
Moreover, your salary will also be in higher numerical that will leave you to invest more for your retirement.
You have to invest 10 times more at this age group for a better retirement.
7 Best Retirement Plans in 2019:
1.) Public Provident Fund:
One of the market’s most sought-after retirement plans is PPF. People usually turn to invest in PPF because of two reasons.
First, due to its annual compounding, second, because PPF offers yearly tax-free interest.
If you want to go for a long-term program to plan your retirement, then Public Provident Fund is one of the best bets.
The interest rate on PPF is set by the government, which is revised every quarter based on government securities return (profit).
In 1968-69, the compounding interest proposed by PPF was 4 percent, while from 1986-2000, it increased to 12 percent.
The current rate of interest on PPF, which was revised in July 2019 is 7.9 percent.
For PPF, however, the compounding power works best for long-term situations.
Therefore, you should start your retirement planning early in this way.
2.) National Pension System:
Pension plans play a crucial role during your old age when you do not have a stable and reliable source of income.
National Pension System provides stability and financial security, as well as ensure that you live your life with pride without affecting your living standards.
Simply put, it creates a large post-retirement corpus and serves as a saving-investment tool that encourages continuous savings during your working years.
This scheme is created by the government and has several advantages even for low-income earners.
The money that you invest in an NPS is contributed to three classes of funds, namely Equity (E), Fixed Return Instruments (C), and Government Bonds (G).
You have the choice to select the distribution of funds. However, investment in equities is confined to 50% of the contribution.
3.) Equity Linked Saving Scheme:
Equity Linked Savings Scheme is an open-ended mutual fund scheme with a 3-year legal lock-in period.
It is the only mutual fund scheme that qualifies under section 80(C) of the Income Tax Act for a tax deduction.
This is the main reason why ELSS stands out among all the other retirement plans.
It invests mostly in market-linked instruments, such as equities, which produce high returns in the long run.
Compared to other tax-savings opportunities such as PPF, tax-saving Fixed Deposits (FDs), ELSS fares well in terms of return on investment.
Hence, you can also invest in this wealth creation option that comes with tax benefits.
4.) Direct Equity in Stocks:
This is a bit risky retirement investment option as it is highly volatile and will not be the best choice for everyone.
There are many factors such as picking up the right stocks, your entry and exit timings determine your ROI.
But when you think of investing for a longer period, this can be the best retirement planning investment option.
For a safe sail, you can diversify your investments in various sectors and market capitalisms.
Normally, with the 1, 3, 5 years plan can earn around 13%, 12.5%, 8% respectively.
5.) Debt Mutual Funds:
This works similar to equity mutual funds and the best choice for investors who are looking for steady returns after retirement.
Less volatile and less risky are the highlights of debt mutual funds.
These investments are made on corporate bonds, government securities, treasury bills, etc with a maximum of 9% ROI.
6.) Fixed Deposit in Banks:
A bank deposit is the safest choice for most of the investors in India.
Many retired people in India are enjoying their retirement from the Interest earned from their fixed deposit.
This investment is secured and guaranteed up to 1 lakhs by Deposit Insurance and Credit Guarantee Corporation.
You can select your interest-earning option as monthly, quarterly, half-yearly and yearly.
Recurring Deposit in Banks work similar to a fixed deposit, the recurring deposit also works the same portfolio.
In a fixed deposit, you have to invest a large lump sum money whereas recurring deposit you can invest even Rs.500 per month.
This small investment will turn up to a bigger ROI for a long period of retaining added with interest.
7.) Real Estate:
This is one of the most valuable retirement planning for your future.
Investing in lands can be used for self-consumption and can also be considered as a source of money (Big money).
The location is the most important factor that determines the value of your ROI.
This investment can benefit you in two ways – capital appreciation and rentals.
You can enjoy your retired life either by selling your property for a higher price or else construct a building for rent.
Investing in these financial instruments will help you lose all your worries about the life that you plan to lead after your retirement.
If you find it challenging to choose the appropriate financial instruments, you can ask for help from the reputable financial advisors like FinEdge to help you out with your retirement planning.
Some of those above investments are risky and few of them are risk-free based on your retirement planning.
Fixed Income investment schemes are non-volatile and help you to accumulate your wealth.
Whereas, market-linked investment schemes are risky and volatile but you can save huge money for your retirement.
How Much Money Do I Need for a Comfortable Retirement in India?
It’s a dream for everyone to plan for a comfortable retirement after several years of employment.
But, there is a question – how much money do I need for a comfortable retirement.
One of the toughest challenges is to build a big enough retirement fund to enjoy your old age.
Generate Income by doing a job or business is your first task.
Then, put a fixed percentage of your revenue for savings and then use the rest of the money for expenses.
Start investing in variable sectors and instruments to create a portfolio (Like the aforementioned ideas).
Once you have proper clarity, you are all set to save more money for your retirement planning.
You should also plan for your expenses post-retirement and start to save accordingly.
Retirement Planning is the process of planning your income goals in your retirement period.
Every person is working nearly 48 hours a week round the clock for survival and they need a rest one day.
That’s the retirement period when you stop working, your income stops.
So with proper retirement planning from a young age can make your retirement life happy.
I hope you have found the article useful and small sharing can help us.