Retirement planning is the process of combining your short- and long-term financial investments, which results in amassing a corpus to sustain your lifestyle once you stop drawing an active income. In some cases, the investments made for retirement help aid your current lifestyle as well. The corpus amount can also help cover the risk of suddenly losing your income to an unfortunate event like disability or death. As a working individual, the onus is more on you to be able to provide for yourself and your dependents post-retirement. This article will help bring out some of the key points that will allow you to create a roadmap for your retirement planning.
• Create a budget for your retirement corpus
Creating a budget in the very first step towards any financial planning. It helps you study the inflow of money you currently have and the expected outflow of funds during your retirement years. Begin by gathering all your financial records. These records will help you estimate your current wealth. Move on to tracking your fixed monthly expenses, such as loans, insurances, etc. Then add your variable monthly expenses like utility bills, grocery bills, etc. In the end, factor in added expenses such as yearly holidays and annual indulgences.
Once you have all your expenses and income in place, compare the two and factor in the inflation cost. The final number shall be your navigating point to create a budget for your retirement corpus.
• Start early to save further.
The calculation is simple here - the earlier you start, the longer you have to save for your retirement years. Use your current age and the age you would want to retire to lay down the initial groundwork. The longer time you have, the more risk your portfolio can withstand. It has been noted by experts that in the long run, stocks have outperformed their safer counterparts, such as bonds. Given that you will have a rate of inflation working against all your hard work and investments, you must take retirement as a real-life scenario from day one.
• Invest in government schemes
Government schemes such as the National Pension Scheme (NPS) is an excellent long-term investment. Such schemes allow you to periodically set aside funds for your pension plan, as well as provide tax relief on your income. You can start contributing to NPS as early as 18 years of age and continue up to the age of 60 years. Once you retire, you can withdraw a lump sum amount from your pension account, which too is tax-free, and continue getting a monthly pension from the remaining sum.
• Create a diversified investment portfolio
Depending on your age and your retirement plans, you should carefully consider the allocation of investments. It is paramount to have a diversified investment portfolio that will provide you with varying returns. Your high-risk, high-returns investments will help you tackle the inflation rate. As for the low-risk, low-return investments will help balance any risk factor surrounding your assets. An important point to keep in mind is that not every investment is suitable for your situation.
• Track and review your plan regularly.
As a follow-up step, you should regularly monitor your retirement plan to ensure desirable returns on your investments. Any changes in your income should be skilfully incorporated as part of your retirement plan. Similarly, any changes in your expenses should also be accounted for in the retirement budget. Finally, these periodical reviews should also review the changing market scenario and the growing inflation rate.
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The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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