At the edges, it all falls apart, is a common saying but with a deep meaning. When it comes to retirement, if you are not planned to face the real world, life can be hard for you and family. So this time, I have tried to play question and answer session with myself and have tried to ask and answer all queries on retirement planning. What lies in it? Is it relevant? When should I start? Where to invest? Etc. all questions answered in a single reading. So here I start with – What is retirement planning?
Retirement planning is the process of planning and managing your short and long-term finances to help achieve your financial dreams both during your working years and retired life. It involves analyzing your financial objectives, current financial position and expected future cash flow to develop a comprehensive retirement roadmap.
Why is retirement planning required?
Without a judicious retirement plan in place, you run the risk of outliving your savings and not being able to maintain the desired lifestyle in your retirement years. You also run the risk of not being able to accumulate enough corpus for your dependents owing to unfortunate and uncertain events like death, disability etc.
Retirement planning helps you determine how much to save today for retirement; how to invest your savings to get the desired returns; how to protect your assets and provide for in case of unfortunate events and how to make judicious use of retirement income post retirement.
What are the benefits of Retirement Planning?
Retirement planning helps you maintain your desired lifestyle during old age. It helps you plan for key life stage events leading up to retirement. It provides financial security to you and your dependents by enabling you to make prudent investments during your working years. It also enables you to make the best use of your hard-earned money post-retirement. One of the key benefits of effective retirement planning is to cover for any contingencies arising from uncertain events which can compromise your ability to meet your financial goals.
What are the types of needs and life-events to plan for?
There are various kinds of needs and life events, some of which are listed below:
- Buying a Home
- Job Transition
- Parenthood
- Children’s Education
- Children’s Marriage
- Retirement Corpus
- Post Retirement payout
- Insurance
- Tax planning
Is retirement planning relevant in India?
With looming demographic challenges, India faces a swelling non-working elderly population. Further, as the life expectancy of Indians increases, the number of years in retirement is also expected to increase requiring you to fund a longer retired life. Also, with the joint-family system making way for the nuclear family system, self-support during non-working years is the new world order. Rising costs for health care and other essentials means you need to save and invest that much more and with proper planning. Therefore, a planned approach to retirement is essential.
How is retirement planning different in the Indian context?
In the Indian context, retirement can only be achieved after a person has fulfilled his responsibilities towards his family (child’s education, marriage etc.). Therefore, retirement planning is not only about planning for a secure and financially independent retirement but also entails planning for key life-stage goals. It also necessitates providing protection against unforeseen events so that achieving these goals does not become a challenge.
What is the process of Retirement Planning?
Retirement planning is not an art but a definitive science which requires taking a 360-degree approach to studying one’s current financial health, long-term goals and risk appetite to design a plan that addresses the retirement and other long-term goals of an individual.
It involves a step-by-step approach:
Step 1: Identifying your financial and retirement goals
Step 2: Analyzing your current financial situation
Step 3: Risk Profiling
Step 4: Asset Allocation
Step 5: Investment Allocation Strategy
Step 6: Periodic Monitoring and Rebalancing
It is essential to seek expert / professional advice and create a comprehensive roadmap based on the different stages of your life to meet your financial requirements.
Questions answered in next post:
- How is Retirement Planning different from Financial Planning?
- How is a retirement advisor different from an insurance agent/wealth advisor/investment planner?
- When is the right time to retire?
- Why do I start early with my Retirement Planning?
- If I start late, can I still plan my retirement?
- What should I look for in a retirement / financial planning advisor?
- How does Retirement Planning help in accumulating wealth?
- Few more questions… Including your query.
