Retirement planning focuses on preparing today for the future life so that individuals can meet all their goals and dreams independently. The process starts from setting up of retirement goals, assessing the amount of money required and then finally investing the amount in such a way that desired amount gets accumulated. Every retirement plan is unique in its sense. This is because every individual has his/her own way of spending life. Therefore, it is important to have customised retirement plan designed specifically to suit an individual’s needs.
Need of retirement planning
People retire from work, not from their life. Thus, individuals have new set of dreams for their retired life. Simultaneously, individuals want to maintain their day-to-day lifestyle without getting worried about the expenses. Let’s face it! Growing old can actually be expensive. Despite frivolous expenses getting reduced, medical bills can soar. Then individuals need to add the burden of inflation. Thus, not having the required money to sustain future expenses can result into stressed life. Purpose of making a retirement investment plan focuses on ensuring financial stability in the later years.
Benefits of retirement planning
Helps in leading stress-free life This is the most important outcome of retirement planning. Properly-executed retirement plan results into leading a peaceful and stress-free life. Having investments which are capable of earning regular income can help in leading a worry-free life. After all, retirement is the age in which individuals have to relax and enjoy the benefits of the hard work they have done in their early years.
- Making the money work In the earlier years of life, individuals are busy in working for money. Everyone works hard to pay off their bills and have a good living. During the retirement days, individuals can find it difficult to work. Therefore, retirement is the time when they can make money work. For this, individuals have to take the first step to their investments at a young age. Starting early has a benefit as the power of compounding can help create the substantial corpus. Retirement fund needs to be well-diversified and it should have the capacity to generate returns. Therefore, it is always advisable to consult with the people already working in the financial industry.
- Tax benefits Enjoying the tax benefits is another incentive for conducting the retirement planning. Investments made in PPF and NSC are qualified for the exemption of taxes as per Section 80C of Income Tax Act. Basically, these are long-term investments which are beneficial for the people seeking retirement.
- Inflation This is probably the most important reason for framing the retirement plan. With time, living cost and value of money will evolve. By the time of retirement, maintaining the current lifestyle will be expensive. Fortunately, retirement planning helps in fighting against the inflation rates. Individuals should always consider making investments in the products capable of beating inflation in the long-run.
Choosing a Suitable Retirement Plan
- Understanding the needs With realistic and rational expectations, individuals can start making investments as per their needs and requirements. It is always suggested that financial requirements should be considered after thinking about the dependents, lifestyle needs, and some personal goals.
- Determining time frame An individual’s age when they begin retirement planning and their expected age for retirement can help in setting up the framework for selecting the relevant investment opportunities.