Retirement life can be considered one of the most difficult parts of your life but at the same time, you can have a life without responsibilities and will be having the luxury to make decisions as per your willingness.
But here comes the twist, simply willingness won’t be enough to fulfill your dreams with that you need ability and ability comes with planning.
Retirement Planning
The first step towards planning is to have awareness regarding your requirements and aspirations for retirement life. During your retirement, your savings/investments should be able to give you-
- An income-generating investment
- Security for your medical expense
- Fund for uncertainties or emergencies
The above listed are the prioritized steps of the retirement plan and after saving enough for that one can plan for a pool of surplus which can be utilized in form of luxuries such as travel, entertainment, gifting and many more. Let’s have a call to discuss your retirement financial planning.
Let’s build further understanding of this by considering a hypothetical scenario. Mr. A whose current age is 35 years, is a salaried person. He is happily married and has a kid. Mr. A wants to be well prepared for his future due to which he decides to invest 40% of his income and will utilize the other 40% on his needs and wishes to spend the remaining 20% on his wants.
In the case of Mr. A, he is starting to invest early and has a long time to grow his wealth but at the same time, he also has responsibilities with him which makes him cautious. So, under such circumstances, he should opt for a portfolio with high to moderate risk.
The allocation listed below can be appropriate as per his current situation.
- 60% Equity
- 15% Bank FD
- 10% Health Insurance
- 10% Debt Scheme/ Public Provident Fund (PPF)/ National Pension Scheme (NPS)
- 5% Liquid Scheme
Retirement planning is a long-term commitment and what life gifts us in the future still remains a mystery. Due to this uncertainty in life, the plan has to be revised accordingly and the allocation has to be changed as per the changing circumstances.
For example, suppose that Mr. A wishes to buy a house or wants to send his kid abroad for further studies, then that will require a higher amount of money for which he might consider taking a loan and will have to pay regular loan payments.
Then under such situations, the above-mentioned allocation won’t be suitable as he might not be able to save enough and changes will be made accordingly.
The above-listed allocation can be appropriate for Mr. A or people in a similar situation but not for all. Suppose, Mr. B whose current age is 59 years and will be retiring after 1 year. His kids are all independent and have a wife whom he has to look after.
Mr. B is about to receive a lumpsum retirement corpus from the company that he is working in.
As per the situation of Mr. B he should opt for a defensive portfolio approach. As Mr. B does not have the advantage of his age and can also not rely on his income and still has to manage expenses for himself and his wife.
Due to this the allocation listed below can be appropriate for him.
- 25% Equity
- 25% Bank Fixed deposits
- 25% Health Insurance
- 15% National Pension Scheme
- 10% Liquid Scheme
In my personal experience with retirement planning, many people start planning for it when they are near their retirement. People who have enough funds still manage to do well but that is not very often.
When it comes to retirement planning one is never too early to start, the earlier you start, the more you invest, and your finances will have much more time and potential to grow. But the key here is to stay invested.
While it is important to have a financial plan, it is more important to have a suitable financial plan, one that builds wealth in a way that your ability matches your willingness.
Keep in mind that “Retirement is about retiring from work and not from life”, so retire with your eyes full of dreams and pocket enough to fulfill those.
