A lot of news you hear about retirement these days is negative, with social security practically not available in India, you may have to work longer, as better lifestyle& health care brings longer life span. With retirement not far around the corner, your needs will be rapidly changing. And you will be asking the big questions – what does retirement mean to me, and will I have enough? How can I be better off? Having a retirement free from money woes isn’t necessarily mean being a Crorepati but rather using the assets you do have wisely and proactively. By identifying what you can control and focusing on that you can put yourself in better position to have a retirement that allows you to achieve your goals.
As our lives change, our financial needs and priorities change too. Even if you’re years away from retiring, it will be wise to be thinking about building retirement fund. Years from now you’ll be a lot happier saying, “I’m glad I did” instead of “I wish I had”. A retirement fund is an assurance that you will continue to earn a satisfying passive income and enjoy a comfortable lifestyle, even when you are no longer working (Active Income).
Concerns of Retirement
Most people are faced with three important questions when they start thinking of Retirement.
- When can I retire?
- How much money do I need to have to retire?
- How do I create regular Retirement income?
Secure Retirement means saving sufficient funds to provide for a comfortable lifestyle after retirement.
You can build up your Retirement savings over a period of time from now. We have proven Retirement products that will help you get ‘inflation-adjusted’ returns over long term.
When working on building a retirement corpus, its important to think about what your retirement will look like. Will you be content to focus on spending quality time with family and friends or does your ideal retirement involve lots of foreign trips and dining out at fancy restaurants? When beginning to think about what your financial needs will be in retirement, it can help to write down five goals you would like to accomplish in your golden years. These don’t have to be monumental achievements, just what will make you happy. Starting to think about these types of things, you can begin to building your retirement corpus around those goals.
How much will you need?
The traditional rule of thumb with retirement was that you will need 70-80% of your income in retirement to be able to live a comfortable life. However, everyone’s situation is different, some people find that they spend more money in retirement than they did the last few previous years and others find they are perfectly content to live their mature years modestly with simple pleasures.
Completing a retirement budget is a far more comprehensive way to examine your money needs than simply relying on a percentage of your current expenses. While it can be difficult to project your lifestyle into the future – especially if you are currently many years away from leaving the workforce – begin by using your current budget as a jumping off point. Of course, remember to calculate inflation, especially if you are more than a year or two from retirement.
Knowing you will have enough on a monthly basis to live comfortably is great, but how do you know if it will last? After all, you don’t know how long you might live, especially with increasing life span resulting in retirement of 30 or even 40 years. Followings step need to be taken in this front;
1. Stick to your decision made both pre & post retirement.
2. Make conservative or no withdrawals from retirement fund pre – retirement.
The Retirement Fundamentals;
1. Start Early: Time is one of the biggest advantages you can have in saving for retirement. Unless your retirement is next month, you have the opportunity to take advantage of compound interest. Because the interest you receive from investments or savings is calculated on your running total of deposits plus your past accumulated interest, you have a chance to see even relatively small amount of money set aside each month add up to large bundle when you choose to retire.
2. Use tax deferred growth solutions: Allow your retirement savings to be free from taxes while they grow in value. Your investment will only be taxed when you withdraw money from the account. Eg. Provident Fund, Public Provident Fund, & Equity Mutual Funds.
3. Diversify: When choosing how to allocate your money among different types of investments, its important to not put too much of your funds into one type. By spreading your investments among the different type of products – stocks, bonds, cash equivalent etc. – you give yourself protection against major losses by one type of asset class while also providing exposure to potential gains in different areas.
4. Grow & Protect: In deciding what types of specific investments your pre / post retirement funds will go towards, its important to think about both risk and reward.
5. Re-balance: If one category of your investments realizes gains disproportionate to other types of investments in your portfolio, your allocations could get out of balance. While there is no consensus on how often you should re-balance your portfolio, we suggest a re-balance once per year.
Monitoring your Progress
Naturally you will want to check your retirement accounts periodically to see how your money is progressing towards your retirement goals. It is wise to make sure your allocations are still appropriate for your time frame, that your investments are still balanced correctly among the different asset classes, that you are sticking to your original plan for investing.
As you get closer to retirement, we move your investments to more conservative choices. This saves you from unwanted movement of market. Let’s say you are in a phase of retirement plan when you want to have 70% of your investment in stocks, 20% in bonds and 10% in cash equivalents. However, your investments in the latter 2 have not been doing so well, while the value of your stock investments has gained significantly such that now, stocks actually make up a total of 80% of the money you have invested. This doesn’t match with your current allocation plan. Rebalance your account would require you to move some if your gains in stocks into your bond and cash equivalent allocations to rebalance your investment.
When your financial future is at stake, there truly are no bad questions. And with the complexity of many retirement solutions & issues, there are bound to be queries that fall outside of your current areas of knowledge. Hence we say “ We are always ready help you”.