Five essentials to do for your retirement planning
Your financial planning is incomplete without retirement planning. With the rise in average life expectancy, planning for retirement has become more important. Planning for retirement is essential to manage medical emergencies, follow life aspirations and become financially independent.
Why planning for retirement is important?
Good retirement planning includes personal as well as financial planning. Personal planning ensures one’s satisfaction during retirement, and financial planning help in budgeting income and expenses based on personal goals. Having an idea about the type of retirement that one wants determines the financial needs of an individual. There are many reasons why you should plan your retirement:
- A person cannot work forever
- Increasing life expectancy
- Unexpected medical emergencies
- Financial independence
Essentials for your retirement planning
One should start planning for retirement when one starts getting income. Starting early may help in accumulating sufficient corpus. It also reduces the stress and burden on the individual when they get near the retirement age. One of the biggest mistakes people make is thinking that retirement is 35 years away. As financial liabilities are minimum in the early years of life, investing for retirement is easy. Here is how you can plan your retirement:
- Find out the investable age – First of all, you should decide at what age you want to retire. Now calculate the years that are left before retirement. This is the investable age. Then determine up to what age they are planning their expenses for. If a person is 30 years of age and prefers to retire at the age of 60 and wants to plan the finances until he is 85 years, then his investable age is 30 years. You can use an online retirement planner or retirement calculator for the same.
- Determine the expenses – Now estimate your current everyday expenses. To maintain the same lifestyle post-retirement, you need to include your everyday expenses. Besides, ensure that you have enough funds for the medical expenses.
- Identify the assets to invest in – Investors can use the advice of a financial expert to find out the asset class they prefer to invest in like Mutual funds, equity, etc. Real returns from the investment are usually lower than the returns expected because of inflation. Investing in the assets offering you the returns more than the rate of inflation is the best.
- Start early – Starting early will help you in creating the desired corpus. It reduces the stress of investing the lump sum amount for the retirement fund. Besides, starting early allows you to invest a small amount regularly to reach the targeted amount. You can use a pension calculator or retirement savings calculator to determine how much money you need to keep aside every month to create the desired corpus.
- Never use the retirement fund – People sometimes use the money kept aside for the retirement fund for a child’s education, marriage, etc. Use a retirement planning calculator online and allocate some amount regularly for your retirement fund.
One of the challenging tasks in creating a retirement plan is balancing the realistic return expectation and desired living standard. The ideal solution for the same is to use the best online retirement calculator and create a flexible portfolio for retirement.