Retirement A topic which seems very distant when it comes to financial planning. Who knows what will happen tomorrow?
But do we also think ‘Who will secure your financial future once you stop working? How can you ensure a steady source of income? Retirement plans can help you because…
- Firstly, it secures your finances in the future and protects your family in case of your demise.
- Secondly, it provides various benefits including tax benefits.
- Thirdly, it provides a substantial amount at the time of maturity.
Many decisions we make have life-changing results some in the near future and others in the distant. Yet due consideration and planning is required, be it – buying a home, car or planning for retirement.
Let’s look at it with an example;
|Profile||Age: 33 year old|
Profession: Marketing Manager at a consumer goods company
Status: Married with a 4 year old son
Profession: Senior Marketing Manager at a financial brand
Status: Married with a 6 year old
|Lifestyle||Frequent family vacations and weekend getaways, Frequent user of premium personal grooming services, Loves shopping and purchasing new gadgets||Owns an apartment, Occasional weekend getaways, has a defined budget|
|Annual Earning||20 lakhs pa||28 lakhs pa|
|Monthly Investments||10% of the monthly earning|
|22% of the monthly earning|
Term plan, EPF, FD, Gold,
ULIP, FD, PPF, Term plan
|Financial goals||Child education plan, health security,|
security for the family
|Retirement planning, health security,|
security for the family
|Retirement Plans||Started with retirement planning after 12 years of working. Invested 10% of monthly earnings for 10 years in Equity Large Cap Fund at returns of 15%||Started planning for retirement right from the start. Invested 22% of monthly earnings for 22 years in Equity Large Cap Fund at returns of 15%|
|Retired life||Retired at 58, however relies on spouse’s retirement pension, insufficient medical coverage, retirement corpus less than 50 lakhs however utilised some for child’s higher education.||Retired at 58, Adequate medical coverage for the entire family, Retirement corpus greater than Rs 6 cr, adequate savings and investments for child education abroad, living a relaxed, secured and lavish retired life.|
The above example clearly states that planning for retirement early and consistently makes a huge difference. Thus, ‘Now’ is the time when you should start planning for your retirement.
Benefits of Retirement Planning
The compounding effect: The earlier you start, the better the compounding effect. Ideally, retirement planning should begin as soon as a person starts earning. In this way, you can set aside a budget for investing some amounts regularly for a longer period and gain from the compounding effect. That’s the compounding benefit that validates the premise as to why people should plan for retirement early.
Plan for unforeseen expenses There could be many unforeseen situations that require you to spend a large amount of money such as medical bills, treatment costs due to illnesses and other unexpected financial needs of your family. By planning for retirement, the corpus you build also serves as a safety net in times of unpredictable situations.
Safeguard property and assets Without a concrete retirement plan, you may be forced to liquidate your assets to support your family’s lifestyle or during emergencies. By investing in a plan that can support you during retirement, you can safeguard your assets and pass your legacy forward to your children.
Deal with relocations smoothly If you already have a plan for retirement, it would be easier for you to accommodate other changes like relocation that may happen in life
You can choose from different retirement plans and customize your portfolio based on your investment appetite. You can also consider ULIPs as retirement is a long term goal and ULIPs are great instruments when it comes to long term planning. Calculate your returns here: https://www.edelweisstokio.in/wealth-plus-online/buy
The earlier you plan your retirement, the more you would be able to save and enjoy your post-retirement days. Plan for your retirement now!