Bangalore, first published Aug 5, 2022, 4:03 PM IST
A few years into your working life, once it’s settled on a nice growth trajectory, you can start thinking about retirement, and rightly so. Professionals tend to ignore this crucial part of financial planning, leaving it to be dealt with at a later date. As we’ll see in this article, putting off planning for your retirement in the future can be unwise, leading to financial strain when you actually start planning, or worse, insufficient corpus when you retire.
You don’t need to worry, though. We have compiled the necessary information and a list of strategies you can implement to create a good pension plan optimized for your needs. Let’s start!
What is a retirement plan?
A retirement plan, sometimes referred to as a retirement plan, is essentially an investment option that allows you to save your hard-earned money for a predetermined number of years to create a stable life for you after retirement.
Pension plans come with a guarantee of providing you with a steady source of income once you retire, allowing you to live on without having to compromise on your lifestyle.
You must make constant monthly contributions to a retirement plan for the chosen term. Additionally, after the selected term ends, you will begin to receive an annuity, which is a fixed payment paid monthly for the rest of your life. This can virtually replace your current income stream with the monthly annuity payment, helping you cover your expenses.
What are the benefits of retirement planning?
- It helps you build up a retirement fund that will allow you to cover any post-retirement emergencies, such as medical bills.
- It develops the practice of savings during your professional formative years.
- It allows you to live independently after retirement without relying on your children.
- You can enjoy tax savings on the insurance premiums you pay for your retirement plans.
- Above all, planning for retirement allows you to spend your golden years doing the things you love, including taking up new hobbies or traveling the world.
How can you ensure you have a solid retirement plan?
- List your retirement goals: You need to start by determining what you want your retirement to look like. It can be anything, whether you invest your time in your hobbies or just go out to see the world. It can be a difficult task, especially if you’re a young professional, but even having a rough idea will go a long way in planning your retirement. This way, you can get a rough idea of the budget to achieve your goals and make you choose the right plan accordingly.
- Analyze your current expenses: Once you have a rough idea of how much you will need to save when you retire, you can start looking at your current spending habits to see if there are any unnecessary expenses that you can cut out of your monthly expenses and put in your budget. savings instead. Small expenses can add up in the long run and make a big difference in your final savings. You can take a look at your spending over the past 3 or 6 months to see if a habitual change is needed.
- Minimize responsibilities: This one may not apply to you now, but as you grow and pass certain life milestones, such as getting married or having children, you will need to take on responsibilities, which means accumulating certain debts. These can include personal loans, home loans, and auto loans. Ensuring you’re careful about how you choose to repay loans and that they’re all closed when you retire is key to ensuring your life after retirement is stress-free.
- Opt for an investment plan for retirement: Retirement plans, or retirement plans, can be extremely beneficial because they can be used as long-term forced savings. You can get in early, enjoy the benefits of compounding over the years, and watch your money grow into a body large enough to provide you with a comfortable life after retirement.
- Keep a close eye on your taxes: As you age and progress professionally, your income will increase and so will your taxes. Here, you may need to make investments that make a certain portion of your income tax-free and reduce your overall taxes. A pension scheme may grant exemptions on contributions up to ₹1.5 lac under Section 80CCC of the Income Tax Act 1961.
I hope this article has explained the basics of retirement planning and provided you with some essential strategies you can use to create a great retirement plan for yourself, or at least sow its seeds!
A great tool you can use to get help is an online tool retirement planning calculator, which gives you an estimate of how much you should have saved by the time you retire, based on your current income, expenses and expected returns on your investments. So don’t wait. Start your retirement planning today!
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Last updated Aug 5, 2022 4:05 PM IST