In the absence of a regular source of income, one needs to have a substantial corpus to support the requirements and expenses of post-retirement life. So, it is necessary to determine a retirement plan and take the necessary steps to achieve the retirement goals.
How exactly should an individual proceed with his/her retirement planning? Here’s a step-by-step guide to help individuals chalk out a strategy that would allow them to live a comfortable and secure post-retirement life.
Individuals should have a sizeable corpus to make sure they or their dependents do not compromise on the standard when regular income flow stops. Here’s what individuals need to do while planning for their retirement:
Step 1: Determining retirement age
The first step to planning for one’s retirement is to determine the age of retirement. Typically, individuals retire at the age of 60. However, this might vary from one person to another. Also, one needs to find out the number of years left for their retirement based on their current age.
This will let them understand the time left for them to make necessary savings and create a retirement corpus. One should also consider the life expectancy rate while making a retirement plan. The life expectancy rate will depend on factors such as family history, medical condition, age, etc.
Step 2: Estimating the retirement corpus
The next crucial step is to figure out the corpus amount so that one can set a target and plan accordingly. There are various factors that individuals should consider while estimating the retirement corpus amount. Some of them are mentioned below:
Note that one might have to make assumptions and estimations to figure out the retirement corpus that they will require.
To estimate the corpus amount, individuals should list out the current monthly expenses. Then they have to consider the inflation rates to calculate how much the current expenses would amount to at the time of retirement.
Step 3: Planning early
People often tend to plan for their retirement later in their life. However, this isn’t the right approach. Starting a retirement plan early in life allows individuals to have more time in hand to make necessary plans and executions. It also provides enough time for one’s investments to grow.
Delayed planning will lead to lesser time for plan execution and investment growth. So, it is always advisable to start planning for retirement early.
Step 4: Developing a suitable investment portfolio with professional help
Individuals should focus on investments in different assets to grow the profits that they can use to fund their post-retirement life. One needs to have a diversified investment portfolio (investments across different asset classes) to maximise return on investment. Furthermore, it is necessary to consider factors like risk appetite, current age, and financial goals before investing.
You may consider mutual funds, stocks, savings schemes, PPF, gold and many other types of investment options that suit your risk profile and other retirement-related parameters.
Since making investments can be quite exhaustive, one can seek help from a financial planner. They will assist in creating an appropriate portfolio as per one’s goals, investment horizon, and risk appetite. Financial planners can also help in determining the retirement corpus as per one’s goals and requirements.
Step 5: Tracking the plan
It’s not just enough to chalk out a retirement plan and make necessary executions. One also needs to check the retirement plan on a regular basis to ensure it is on track. Any modifications in the retirement age, monthly expenses, income, or other factors have to be updated and incorporated into the existing plan.
Keep in mind that the right time to start building a retirement plan is now! One can follow the above-mentioned steps and begin planning for retirement life.
In addition to creating a plan for post-retirement life, it is crucial to get a health insurance policy to get the risks covered.