The earlier we start retirement planning the better; especially in today’s environment where no matter what we do, nothing is enough. But most of us due to hectic schedules end up delaying this process, waiting for some more time. Some even end up delaying it to their 45th birthday or later. And with 35 ideally being the age to start retirement, some might even get into a panic mode. But, there is still hope for those in this age group; with plenty of retirement plans and techniques one can adopt to make up for lost time.
The only key here is to start as soon as possible. So here are few tips and solutions we have come up with, for anyone planning a retirement (the earlier the better) and especially for those planning it later…
Set a Target
Imagine managing to save only Rs. 50,000 per month for your retirement. However, in reality – with the way inflation works – we may need much more as monthly expenditure by the time we retire. The last thing you want is to be struggling to make ends meet or asking for help from another person or even take up odd jobs. If that is not how you picture your retirement, then it is safer to first map out a clear plan and have a realistic estimate about how much you may need during retirement.
You might feel that the savings you plan are enough for retirement, but there could be other substantial expenses that may come up such as — buying a house or children’s education. The ideal situation is keeping retirement savings separate from short and medium term goals. So basically, the amount that you are saving should be touched only after you stop earning. Keeping this focus intact can lead to a secure and stress free retirement.
Start Investing Immediately
If you invest “x” amount of money per year at the age of 30, it would become for instance Rs 2 crore by the time you are 60 (due to the compounding rate of interest in 30 years). But if you start at the age of 40 to reach the same amount by the time you are 60 (since you have only 20 years left), you may need to invest double the amount per year. While this is possible, it is less taxing to invest lesser at an earlier age and let the compounding rate of interest make money for you; rather than you needing to work harder to save money for later. So no matter your age; the key to a stress free retirement planning is starting as fast as possible; and if you are already late the best thing to do is start immediately.
Don’t Put All Your Eggs in One Basket
Just like we never depend on only one option when we are unsure about the outcome, while planning a retirement it is important to invest in a diversified portfolio while observing market trends. One needs to take a calculated risk by investing in various asset classes.
For instance, we took a look at the portfolio of a Mr. X who had chosen a retirement specific ULIP of ICICI prudential; which is a good option for a market-linked asset including equity, offering potential of high returns – along with addressing the concern of inflation and also catering to Mr. X’s protection needs. Along with this, he had also invested in other assets like long-term debt instruments, PPF, equity stocks, including others; hence diversifying his portfolio.
Do a Thorough Research
Imagine investing all your hard earned money and later not getting the returns you need for a comfortable retirement. So even though this part may seem tiresome and takes a lot of time, it is definitely worth the effort. Overall it is better to consult a well trusted financial expert, get information from reliable sources, get reviews from trusted sources and keep only required amount in the savings account by investing the extra money wisely to counter inflation rate. Finally once we know the best options available, there are also various easy and viable methods available out there such as – being able to invest in a mutual fund or ULIP online; this helps in increased returns as it eliminates the commission needed to be paid to the agent.
Eliminating Consumer Debt
Credit cards, personal loans, etc. are very tempting when you want to plan an impromptu holiday for your family or want to get your daughter the iPod she has been hoping for her next birthday; but these have a high rate of interest if not paid on time. If you are a late starter, eliminating this debt and not spending more than one can afford to avoid accumulating new debt is one way to reduce the pressure; as you would need all the extra money towards future savings.
Get a Direct Debit or Automatic Savings Withdrawal Plan
This way the money will automatically be debited from your account and it will lower spending; but in turn you would get a great feeling and peace of mind of being on track with your retirement plan.
Use Bonus and Raises Directly Towards Increasing Savings
Rather than increasing unnecessary expenses, you can take the load off monthly payments for retirement and directly put any extra income or bonus towards your retirement plan. What you never had, you’ll never miss.
Eliminate Unnecessary Expenses
Frivolous expenses incurred at few times can add up to being a sizeable sum which can impact your future savings. For example, a pricey dinner at a posh restaurant can provide you momentary joy, but puts a dent in your ability to save for future.
To summarize, the bottom line is that its – “never too late to begin saving for retirement”. Better late than never…there are plenty of options and solutions to start increase savings besides the one described above and in turn reduce cash flow – the only key is to act now & start planning your retirement.