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Investing in A Financially Secure Retirement
Updated : March 21, 2023
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Table of Contents
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Key Points to Understand Financial Planning for Retirement
Here’s a short summary of what was discussed during this session-
Retirement Planning And The Impact Of Covid-19 On Retirees:
A lot of retired individuals saw tough times during the COVID years, mainly due to lack of funds to sustain their lifestyle. This kind of situation is often due to a complete lack of retirement planning. People often hold back on planning for their retirement because they either choose to rely on their children for their financial needs or simply neglect saving up believing they’ll manage one way or the other.
The Importance Of Saving From A Young Age
From the age of about 21 or 22 you would tend to start earning. During this period, up until you marry, you would most likely be completely independent. This is the best time to start saving up. Once married you may have a spouse or children to support meaning your expenses would increase. However, it is important to manage your expenses in such a way that your savings do not take a hit. Avoid dipping into your savings during this period unless you have run out of options.
Prioritising Savings Over Expenses
Your savings are like a safety cushion you can fall back on when you retire. Your expenses need to be set based on how much of your income you would be willing to save and not the other way around.
Controlling Expenses And Avoiding Impulse Buying
During the years where you are working, it is important you learn how to control your expenses. Understand your negotiable needs and non-negotiable needs. Avoid impulse buying by asking yourself two key questions- do I really need this and is it really worth the cost? If the answer to these two questions is yes, wait another 48 hours before you go through with the purchase. Go ahead and buy it only if you still feel the same way about it after these 48 hours.
The Amount Of Savings Required For A Comfortable Retirement
If your expenses are about 1 Lakh per month, you’d need about 3 crores to last 25 years in retirement. This would be possible, or rather, much easier if you have a source of income even during retirement. This income can be through active sources, or through passive avenues like rental income, mutual fund returns, stocks, ect.
[widget_owner_form]Investing to Make Retirement Life Easy
Investment Options For Retirement Planning
Indian families tend to invest more in real estate or gold. In fact, it isn’t uncommon to find families whose 50-70% financial portfolio is tied up in these avenues. However, these investment options offer low returns despite appreciation over the years.
Importance Of Spending On Key Instruments Like Insurance And Mutual Funds
Finding the best investment option is not as straightforward as most people would like to believe. Investments to save for retirement need to be made based on personal factors such as age, ability to save each month while working and what your goal for retirement is. It is best, however, to choose safer options like Systematic Investment Plans like mutual funds.
Spending on key instruments like health insurance, life insurance, etc is very important, especially for people of advanced ages. This will help take care of any sudden unavoidable costs like medical bills during your retirement and you won’t have to dip into your savings and drastically alter your lifestyle.
Make simpler changes to your lifestyle on things that won’t severely affect your day to day life. An option would be to move to smaller or more budget friendly living options.
Find the right budget-friendly retirement living option in your city here with NoBroker.
Learn more about retirement income and retirement planning options with a financial expert. Take a look at this video for the full session-<https://youtu.be/u4bL2awlpO4>
FAQ's
A1: Financial planning for retirement is the process of assessing your financial situation and creating a plan to ensure you have enough money to support your lifestyle after you retire. This includes analysing your sources of income, estimating your expenses, and developing a savings and investment strategy.
A2: The earlier you start financial planning for retirement, the better. Ideally, you should start planning as soon as you begin working. This will give you more time to save and invest, which can result in a more secure and comfortable retirement.
A3: The amount you need to save for retirement depends on your expected expenses and the lifestyle you want to have after you retire. A general rule of thumb is to aim to save enough to replace 70-80% of your pre-retirement income. To determine the amount you need to save, consider using a retirement calculator and consult with a financial advisor.
A4: Common mistakes in retirement planning include underestimating expenses, not considering inflation, relying too heavily on just one type of savings, and failing to diversify your investments. Working with a financial advisor can help you avoid these pitfalls.
A5: To make the most of your retirement savings, consider investing in a diversified portfolio of assets, taking advantage of tax-advantaged retirement accounts, and avoiding excessive fees. It's also important to regularly review and adjust your retirement plan as needed to ensure that you are on track to meet your financial goals.
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