We are so much absorbed in our everyday activities of life that we almost forget to plan our retirement. But retirement planning is very important in our life after retirement especially if you want to have a financially independent.
For this, you need to follow some simple steps properly, in order to get rid of all your financial needs. Let’s go through some of the important things that you need to know.
Why is Retirement Planning Necessary?
You should have to look closely at each of your income sources if you wish to plan for your retirement. Let us suppose that you started your savings when you are 30 years old. The benefits of starting a plan for retirement in early stages is that you can have 30 years of the time period to acquire a large amount of money for your retirement corpus. If you started to invest Rs:5,000 every month, then the corpus will gain to Rs 75 lakh (we have assumed a compounded annual growth of 8 percent) by the time you turn out to be 60 years.
However, If you start your savings by lately at the age of 40 years, you will only be able to acquire Rs:30 lakhs only for your retirement. If you delay your retirement planning by 10 years, then your corpus will be even less. The reason for such low corpus is that compound interest will not be levied on your sum. You have to remember that it isn’t savvy to bring down your savings for retirement. Ensure that you deliberately plan for your requirements.
Let’s See a Case!
Shyam Shukla wanted to take a voluntary retirement scheme (VRS) at 65 years old years in 2001. Arunima retired in 2008 at the age of 63 years. Both of them live with their close family that includes their child, his wife, and their granddaughter. They don’t have any financial responsibilities towards their kids as their son and their daughter-in-law are also working. In this way, their prime objective is to travel and explore new places.
Income every single month (pension plus interest) – Rs 55,667
Expenses (Monthly) – NA
Surplus (Monthly)# – Rs 20,667
Equity – Rs18 lakh
Real Estate property – Rs 2 crore
Debt – Rs 63.8 lakh
Cash/Jewellery – Rs 20,000
Keep Aside at least 10% of your Salary Every Month
The very first rule that you have to religiously follow in order to acquire a sufficient retirement corpus is to start saving as early as possible. It is one of the easiest rules that you can follow. Maybe it is the hardest rule for individuals who spend extremely. We know the way that provident fund gets deducted from the income of the individuals who are on a regular payroll. In this, 12% of their basic salary plus an equal contribution of the company is contributed into their PF account. In any case, the best thing about PF is that one can’t choose to avoid it even if they want to. Along these lines, the tip is that you do now consume these unavoidable savings.
Do Not Consume Your Savings Recklessly
“Additionally, people ought to dispose of all debt before retirement with the goal that it doesn’t eat into the corpus,” says Gaurav Mashruwala, a well-known financial planner. Each time we switch our jobs, our PF savings fall under greater risk. The significant explanation for this is amid this time each individual has a choice to withdraw their PF balance when they have to transfer their PF account to the new employer. Consequently, individuals tend to pay their debt using these savings. In this way, it is advised to remain clear of debts and does not let your debts wash out your savings.
While getting ready for your retirement you can likewise think about your friends and family. You have to realize that a piece of your savings may assist you with saving cash for your children and even your grandchildren. You may need to spend money on their education or simply pass it on to your children as a sentimental asset. This may incorporate a land property that you can pass on to your relatives. Without proper retirement planning, you might have to liquidate your assets so as to cover up your expenses during your retirement period. Because of this, you might not be able to provide your loved ones with a financial legacy. Far more atrocious this may wind up in making you a money-related weight on your family amid the retirement age.
Over to You!
As we realize that life is quite uncertain and this is the reason we have no clue what may come to pass for. Unexpected illnesses, your dependent family and pension schemes are certain factors that come into play. In this way, it is encouraged to begin a proper retirement planning right from the time you start earning.