Retirement planning is the planning for future – second innings of life!

It is a route taken to make our future financially safe & secure. But how many of you are seriously thinking about it? The problem is most of us are not and we keep deferring planning with bucket of excuses- I need to account for child education, my future short term goals, just to name a few.

Postponing Retirement is certainly not a good idea! Now, the question is why?  Why do we delay this decision? Is it because we are unclear about what exactly needs to be planned? Or are we not ready yet? Or is it because of the unanswered questions like:

1. At what age should I start for retirement planning?
2. How much money is require to fund the retirement?
3. Why do I need to save if Retirement benefits are offered by my employer?
4. What if I am not able to achieve the objective?

All these are open ended questions just like the retirement planning which will encourage more questions with each further step. But that doesn’t implies that we should wait and watch. It’s just mean involve yourself in process and get the answers as it is your life and retirement.

What’s the right age for saving?

There is no such right age to start saving for retirement but it’s advisable to start early when you starts working/earning. Improve “saving” (habit) is the only key that helps.

Your retirement planning depends mainly on two factors – Time & Rate of Return.

In investment planning time has more value than money. Time will allow your money to raise but you cannot buy the lost time with money. If you start early, even with small percentage of savings, time is your best buddy – remember your best friend compound interest!

If you are late you have less time to accumulate your required fund and that too with higher risk. In other words, you have to take some risk for higher rate of return to cover the difference of time. But with proper planning you can still make it.

How much?

The ideal answer is – 70% of your pre-retirement yearly salary to live comfortably (no debts) through post retirement. Honestly, people want to enjoy retirement with same standard of living which they were in pre-retirement. No compromise!!!

Today’s spending pattern affects saving for retirement. Attitude towards high living standard is increasing and no one want to alter because of availability of easy credit. But all these things make the retirement planning difficult. Your post retirement life depends a lot on your current cost of living. Increasing debts, loans and credit cards dues, reduces savings. Retirement is not just about freedom from work, office but it’s also about adjusting with restricted income and falling your wants.

Rightly said by Gene Perrot-‘It’s nice to get out of the rat race, but you have to learn to get along with less cheese’…

Will my PF, pension plans and retirement benefits not enough?

Unfortunately, No! Many people still depends upon the retirement fund/benefits from the employer. But that’s not enough. Mounting standard of living, growing life expectancy with higher medical cost demands more fund at retirement. It will serve only 40-50% of your objective. But remaining percentage have to be filled up from your own savings. The concern after retirement is – Health. And most of your funds will go towards medical expenses. With daily expenses it may be quite hard to fulfill all expenses through Pension or Interest income. Increasing inflation will also have an impact on your interest income.

One important point to note here is that retirement planning may include planning for your life partner too.  So keep your partner in mind as well.

What if retirement savings are not enough?

This is a very common question and the options are limited. Start earning second income, delay Retirement, cut down unwanted expanses or moving to place where cost of living is low.

So Start early and be wise 🙂

Reference(s): Retirement Countdown: David Shapiro