Retirement planning follows similar principles to retirement planning in general, but there are some specific factors to consider. Retirement planning is important because it allows individuals to secure their financial future and maintain a comfortable lifestyle after they stop working. It ensures that they have sufficient savings and investments to cover their living expenses, healthcare costs, and other needs during retirement.
By planning early and setting aside funds, individuals can take advantage of compounding interest and investment growth, maximising their retirement savings.
According to the findings of ‘Is India prepared for retirement?’ study, done by ICICI Prudential Life Insurance, over three-fifths of the respondents indicated that their retirement goals include enjoying life, staying connected with friends, travelling abroad, feeling financially secure, and having peace of mind in this new chapter of their lives.
The report said that currently 11% of total income is channelled towards retirement-specific savings. The survey also revealed that the respondents consider an average corpus of Rs 65.4 lakh as ideal for retirement.
Here are some general steps to help you build a comfortable corpus for retirement:
Determine your retirement goals: Start by envisioning your desired lifestyle during retirement. Consider factors such as housing, healthcare, travel, marriage of children and any specific goals you may have. Take into account cultural norms, family expectations, and potential support systems available.
Estimate your retirement needs: Assess your current expenses and estimate your future expenses in retirement. Consider factors such as inflation, healthcare costs, and the impact of changing lifestyles. Use retirement calculators or seek advice from a financial planner to get a realistic estimate of the corpus required to support your desired lifestyle.
Start saving early: As with retirement planning anywhere, starting early is crucial. The power of compounding can significantly boost your savings over time. Develop a disciplined savings habit and set aside a portion of your income specifically for retirement. Automate your savings by using systematic investment plans (SIPs) or other tools available.
Utilise retirement-specific investment options: There are various retirement-focused investment options that provide tax benefits and help accumulate a retirement corpus. These include the National Pension System (NPS), Public Provident Fund (PPF), Employee Provident Fund (EPF), and tax-saving fixed deposits, among others. Familiarise yourself with these options and determine which ones align with your goals and risk tolerance.
Consider equity investments: You may consider including equity investments in your portfolio for retirement. Mutual funds, equity-linked saving schemes (ELSS), or direct equity investments can be part of your strategy. However, be mindful of the risks associated with equity investments and choose options that match your risk tolerance and time horizon.
It’s important to note that investing in mutual funds involves market risks, and past performance is not indicative of future results. It’s advisable to consult with a financial advisor or conduct thorough research before making investment decisions.
Review and adjust your investments: Regularly review and rebalance your investment portfolio based on your changing needs and market conditions. Consult with a financial advisor who specialises in retirement planning to ensure your investments are aligned with your goals.
Plan for healthcare expenses: Healthcare costs can be significant, especially as you age. Consider purchasing health insurance plans specifically designed for senior citizens. Additionally, explore options for long-term care insurance and factor in potential healthcare expenses in your retirement calculations.
Take advantage of government schemes: The government has introduced various retirement-related schemes and benefits. Stay updated on government initiatives such as Atal Pension Yojana (APY), Pradhan Mantri Vaya Vandana Yojana (PMVVY), and Senior Citizen Savings Scheme (SCSS). These schemes provide additional avenues for retirement savings and income generation.
Seek professional guidance: Retirement planning can be complex, especially when considering tax implications and changing regulations. Consider consulting with a financial advisor or a certified financial planner who specialises in retirement planning. They can provide personalised advice based on your specific circumstances and help optimise your retirement strategy.
Retirement planning is a long-term endeavour, and it’s crucial to start early and remain disciplined. Keep yourself informed about the changing financial landscape and adapt your plan as necessary.