If you wish to maintain the same lifestyle that you are leading now (when you are still young), then it’s important that you start planning your retirement. You may think that planning for retirement at this point in life is not necessary, however, the sooner you start planning for retirement, the better for you.
The amount of money that you spend today on a monthly basis may not be the same when you get old. Hence, you will have to calculate this amount and start putting aside a certain sum as your savings for retirement. In old age, you may need more money to take care of your medical expenses; hence you need to plan accordingly.
Inflation is another important aspect to be taken into account – the value of a certain sum of money may not be the same in the future, and hence you need to start planning and saving so that there are enough funds to take care of your day to day expenses despite inflation.
Most often, people do not like to be dependent on others even during their old age. It’s a question of self respect and being independent. Hence, retirement planning is important to keep you going when you are not working.
Although retirement planning is important, many people still neglect it thinking that they will take care of themselves after retirement when the time comes. They feel it’s a waste of time to plan for retirement when they are still young. However, they fail to realize that if they don’t plan for retirement, they may have to face difficult situations later in life.
While planning for retirement, you need to take certain factors into consideration such as:
1.Your current income: Based on the income that you earn at present, you can decide the amount that you will require post retirement in order to maintain the same lifestyle. Irrespective of what you earn today, you need to make sure that you have enough savings to take care of your needs tomorrow.
2.Age at retirement: You have to decide at what age you plan to retire and then plan your savings accordingly. If you are still in your twenties or thirties, it may allow you to follow a more conservative approach in planning for retirement as you have enough time on hand to build your savings. On the other hand, older folks may choose to follow a more aggressive approach in order to maximize their savings in a shorter span of time.
Which plan suits you best?
There are several factors that you need to take into account while choosing a retirement plan, such as:
Eligibility: Each retirement plan will have its pros and cons. You first need to check for the eligibility criteria of such plans to know whether you fit in, and if you can go in for that plan.
Benefits: Another important factor to take into account is the benefits or advantages of a retirement plan. Each plan may not be tailor made to suit your needs; but you can always take help from a certified financial planner to help you choose a plan or a combination of plans that meets your requirements.
Flexibility: Flexibility is another important parameter. You need to know if the plan is flexible or not, whether it allows you to withdraw money when need be, if there any chances of getting a loan and so on. This is an important aspect to be weighed as you never know what emergencies may arise and when you may be needing the money on an urgent basis.
Everyone wishes for a comfortable retirement or a comfortable retired life. However, it takes time, sensible planning and consistent effort from your side today to secure your tomorrow. Pension plans may not suffice to fulfill your expenses post retirement. Also, old age will bring with it unforeseen medical expenses that may act like a big burden if not planned for properly in advance.
You may also want to provide financial support for your grandchildren. In such cases, it is best if you plan for your retirement well in advance so that you have enough funds to take care of your dependents.
Remember that there’s no magic number that will tell you the exact amount you need for retirement. However, with the help of certain tools and a number crunching exercise, you can arrive at the approximate figure that you will need at your retirement. Other factors that you need to consider while arriving at this figure are, the age you plan to retire at, the market value of your current savings, the expected rate of return on you savings and the annual income that you would need in your retirement years.
So, it’s best to start planning for your retirement when you are in a position to put aside some money in the form of savings rather than wait for the time when it becomes impossible for you to handle your expenses. So start your retirement planning when you are still young to enjoy your life post retirement.
Posted in Personal Finance category.