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Retirement Planning in India


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Everyone wants to lead a comfortable retirement. Without adequate planning it probably won't happen. People are living longer than ever before, which is obviously good news, but that means retirement is becoming more expensive. Only 11% of the working population in India has any form of social security for old age


Retirement planning means setting aside of money or assets for the purpose of deriving some income during old age. This is to be done before reaching retirement age. But the process of retirement planning is based on a person's desired retirement age and lifestyle.



Steps to retirement planning


Start early and retire peacefully


Never delay planning for retirement. Start as early as possible. Make a list of your financial goals and what you own so you recognize the gap between the reality and your dreams.


For example, start saving for retirement at age 25, so that even if you wish to retire by 60, you have an investment horizon of 35 years. If at the age of 25, you start investing Rs.10, 000 per Annum at the rate of 13% compounding then the maturity amount (when you are 60 years of age) will be Rs.1, 300,000. Alternatively if you commence the same investment at the age of 35, then the maturity value at the age of 60 will be Rs.650, 000.


With a 10 year lag, the retirement savings at 60 years is more than halved!


Plan wisely

Assess your income and expenditure and make arrangements for emergency needs. For example, set aside some money for medical expenditure after retirement. Try to cut down on the unnecessary expenditures and allocate your resources towards necessary ends like children's education and marriage that you will incur in the course of time.


Consult a financial advisor

If you are not in a position to make a workable plan, consult a financial advisor who will help you develop one. Analyze the options from the retirement perspective, because it should be beneficial at retirement. So it can be with a limited equity to longer period could be vital.


Remember, your aim is to make decisions that will be most effective in helping you to realize your future financial goals, based on your current personal financial situation.


Track and review your plan

The financial plan has to be reviewed at regular intervals to make sure whether the target meets the objectives. Also, understand and get comfortable with the risks, costs and liquidity of your investments.


Don't dip into your retirement savings

Don't touch this pool of savings pre-retirement. If you spend money from your retirement kitty to fulfill your present needs, you will lose out big in the long run. The corpus for your retirement will be that much lower.


Types of Plans

ULIP (Unit Link Investment Plan) - In ULIP, a part of the investment goes towards providing the life cover. The other portion of the ULIP is invested in a fund which in turn invests in stocks or bonds; so you get a better amount at the end of the period.


Annuity is a series or stream of payments. An annuity is a contract with an insurance company under which they pay money for a stipulated period.


Retirement Life

The idea of retirement is changing and there is more to retirement planning than saving money. After retirement the quality of life can be improved by spending more time with family members and also traveling to some places where we can get to know some good values as well as enjoy the nature.


The conversion into retirement is a very unique and dramatic step in life. Yet, the transition into retirement is rarely given the planning or thought it deserves. Unfortunately, far too many people go into retirement with no planning, and little understanding of what will happen. Actually the rising stock market and the improving real estate property values all disguise the fact that the hefty company compensation plans in the past are no longer present today.


But middle-aged individuals believe that they can expect a higher standard of living once they retire and spend their time in leisure, but it is in vain. This is because they had not planned their retirement properly when they were working and their standard of living declines significantly.


Retirement is the stage where you should enjoy the fruits of your labor. These issues are a wake-up call for people who are nearing retirement. So it is important to plan ahead and be financially prepared once you reach retirement age. So it is better to understand the social aspects of retiree's life and look into those investment options which suits better and face retirement with excitement rather than fear.


Retirement Planning in India