In India, people generally retire around the age of 55-60 years. However, many people choose to take on early retirement, especially those who have somewhat unconventional life goals. No matter the retirement age, it is very important to plan today for the financial needs that will arise after you retire. Timely retirement planning can help you in achieving your life goals while living a comfortable retirement life.
The main objective of retirement planning is to make financial provisions for a comfortable life in the future. Factors such as inflation rate, the rising cost of goods usually influence the planning exercise. Retirement planning should be done in a manner that you can easily maintain your standard of living. Apart from this, there are many reasons why retirement planning is very crucial.
Top five reasons why retirement planning should be on your priority
If you are currently working in a corporate environment, working hours may make it difficult for you to achieve your goals while you’re still young. Hence, it is natural if you aim to accomplish some of your life goals after retirement. With appropriate retirement planning, you can have sufficient retirement funds set aside for specific life goals such as traveling, following your passion, etc.
Increased life expectancy
Retirement planning must be thought of as a combination of financial and personal planning. With a higher life expectancy in today’s times, it is important to be financially prepared and have sufficient resources for an extended lifetime. With shorter working life and higher average life expectancy, you must safeguard yourself from a situation of having exhausted all your resources by the time you are 60-65. A good financial plan to cover an extended retirement age will help you to be self-reliant and continue achieving personal goals much later in your life.
Provision for medical emergencies
Life is often unpredictable, making it all the more important for an individual to plan for retirement early on. As you grow older, there are higher chances of having unexpected medical emergencies for yourself or your family. With rising medical costs, you must incorporate medical needs while planning for retirement funds. Investing in a retirement plan that has a critical illness cover rider is one of the options that you can explore.
Liquidity post retirement
India currently does not have any social security system that can take care of the financial needs of the elderly population. Even government employees do not get sufficient corpus from the government that can be depended upon post-retirement. Therefore, you have to bear all your expenses after retirement. To ensure a smooth retirement life with sufficient financial liquidity, it is important to focus on retirement planning while you are young.
Cover for inflation
The impact of inflation on your investment returns cannot be directly controlled. However, through investment in market-linked products such as Unit Linked Insurance Plan (ULIPs) you contain the inflation impact. This is, provided you plan your finances appropriately. Long-term investments can also help you to accumulate the desired corpus by allowing the growth of your investment at the desired pace. This will further help in combating inflation and achieve your retirement goals.
Retirement can be the start of a stress-free life if your future finances are well-planned. You can work towards ensuring that you do not have to struggle with insufficient resources post-retirement. Invest in mediums such as pension plans at a young age to retain your lifestyle and enjoy the benefits of regular cash flow. The earlier you begin planning and investing, the smoother the path towards attaining retirement life goals.
- What are the best investment options for retirement?
Some of the commonly used investment options for retirement savings are PPF, debt mutual funds, hybrid mutual funds, post office monthly income schemes, etc.
- What is the safest investment for retirement?
PPF is often considered as a safe investment option for accumulating a retirement corpus in India. PPF comes with a lock-in period and is safe since it is backed by the Government of India. NPS is another scheme which is market linked but is backed by the Govt, so is considered safer.
- Which mutual fund is best for retirement in India?
Mutual funds that are specifically designed for retirement savings and even index funds can provide the right opportunities to generate wealth for retirement.
- How much should I save for retirement?
The amount of money you will need post retirement is a good starting point to begin planning your investments now. This could differ from person to person. The main factors to keep in mind while calculating for retirement money are retirement goals, responsibilities, and any income expected post retirement.
- Should I invest in a pension plan if I am contributing to EPF?
You can invest in EPF only till the time you are employed in a company. Therefore, as a backup, you must always have a pension plan investment running. This will help in creating a sufficient corpus for your retirement.