Beginners Guide for Retirement Planning

A couple facing the sunset

Retirement is one of basics of financial planning. To have a fun, stress-free and happy retirement; you need to start retirement planning at the earliest.

And no matter how you want to spend your retirement life, you need to plan for it now. Because once you retire, you will no longer receive a salary or earn regular income. And to sustain your daily expenses;  you will need a financial back-up.

For this, you need to answer the following questions

– What age do I plan to retire?

– What is my currently monthly basic expenses?

– Can I generate income during my retirement?

These questions can help you get started with.

The Best Approach To Retirement Planning

It is important to understand why many fail at retirement planning. And one big reason is that they start late.

At times, individuals are unable to set aside some amount of money needed for their retirement. They can contribute only a part of it, not all. As a result, they end up postponing their plans.

This is a not the right approach. 

Instead, the right approach is to start off with what you have. And slowly make up for the deficit at a later stage. On the other hand, if you decide to simply wait for an ‘opportune’ time, it might be too late by the time you start.

Making an early start is your best bet at being prepared!

To plan your retirement you need to take a few steps

1) Decide Your Retirement Age

The first thing is deciding the retirement age.

Estimating your retirement age is very important as after this age your regular income stream will stop or reduce considerably. And you will have to depend on your savings and investments to take care of your retirement needs.

2) Start Early

To reap the benefits of retirement planning; start the process as soon as possible.

With several years in hand, you have time and the power of compounding in your favour.

3) Determine Your Retirement Corpus

Retirement corpus is the amount that is required post retirement to meet your expenses and continue with the same lifestyle.

If you find it difficult to calculate, consult a professional financial planner who will guide you through this.

4) Calculate The Future Value Of Your Current Savings

How much do you save annually plays a very important part in building your retirement corpus.

Ideally, save a portion of your savings towards retirement.

5) Cut Down On Unnecessary Expenses

If you are unable to reach the target, cut down on avoidable expenses like your weekly entertainment, impulsive purchases, dining out, foreign vacation, etc.

6) Plan And Create An Ideal Portfolio

It is important to have a diversified investment portfolio across the asset classes. Depending on your age and the risk that you can afford, you should define a standard allocation to each asset class with the help of a financial planner.

7) Assess Your Plan Regularly

Your retirement plan needs to be monitored at regular intervals ideally at least once a year to make sure you are on target to meet your objectives.

Any changes in the income, expenses, retirement age, etc. needs to be incorporated in the retirement plan.

Conclusion

Importance of retirement planning cannot be underestimated. Nowadays, the burden of retirement planning is falling on individuals.

One of the most challenging aspects in retirement planning is striking a balance between rate of return and a desired standard of living.

The best solution is to focus on creating a flexible portfolio that can be updated regularly according to changing market conditions.

If you are finding it difficult to plan yourself; it’s best to take help from a professional financial planner.

Do comment below as to how you are planning for your retirement?

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