Securing a financially comfortable future after years of dedication is a primary concern for many. While the golden years hold the promise of relaxation and well-deserved leisure, a secure retirement doesn’t happen by chance. Retirement planning is the process of preparing for the financial needs of your retirement years. This involves saving for retirement, managing your investments, and protecting your assets and income. By taking proactive steps today, you can ensure your retirement is a chapter filled with financial freedom and the ability to pursue your passions.
Retirement planning in India can be done by investing in a range of retirement plans that can help ensure a steady stream of income to maintain a certain lifestyle post-retirement. Currently, the retirement plans in India include annuity plans, retirement funds, unit-linked investment plans and the National Pension System.
Why Plan for Retirement?
Let’s better understand why you need to plan for retirement.
Preparing for a Longer Life
Advancements in healthcare and awareness about healthy lifestyle choices have increased India’s life expectancy from 68 years in 2015 to 69.7 years in 2020. With India’s growing life expectancy, people today have to plan their finances expecting to live longer than earlier generations. Retirement planning is not just about saving money. It is also about ensuring that the retirement savings will last throughout the retirement years. To achieve this, one needs to plan for retirement with a long-term view, considering inflation, increasing healthcare costs, and other expenses. Individuals must select retirement plans that enable them to enjoy a stress-free retirement and focus on the things that matter the most to them.
Fight Inflation
Inflation refers to the rate at which the prices of goods and services increase over time, decreasing the purchasing power of money. You must consider the impact of inflation on the cost of living while planning for retirement. If you assume an inflation rate of 5%, the cost of living will double in 14 years. So, if you’re hoping to retire in 20 years, you’d need more than double what you require now to maintain your standard of living. Retirement plans find safe avenues to invest your money and build a corpus that can help you battle the impact of inflation.
Leave a Legacy
Retirement planning enables you to leave a legacy for your loved ones. Planning your retirement helps you accumulate wealth that you can use once you retire and pass on to your loved ones. By starting to save early for retirement and investing in retirement plans that offer guaranteed returns, you can build a significant corpus over time. You can also use the accumulated funds to support a charitable cause and help make a difference, leaving a legacy that goes beyond financial wealth.
Maintain Your Standard of Living
Crucially, retirement planning enables you to maintain your standard of living once you hang up your work boots. Retirement planning involves identifying your retirement goals, estimating the expenses, and creating a plan to accumulate sufficient savings to meet them. You can use retirement plans to create a retirement corpus that provides monthly payments to help replace your regular income and maintain your standard of living. Since these plans invest your funds, they can help battle the impact of inflation on your finances.
Fulfil Retirement Goals
Retirement planning empowers you to translate your vision for retirement into reality. By setting clear financial goals, like travelling the world or supporting loved ones, and building a roadmap to achieve them, you gain control over your future financial security.
Such meticulous planning ensures your retirement savings effectively meet your desired lifestyle. This will allow you to embrace your golden years with peace of mind and financial independence.
Be Emergency-Ready
Retirement is not all sunshine and leisure. Unexpected events like medical emergencies or home repairs can disrupt your financial security. Building an emergency fund specifically for retirement can provide a buffer during these challenging times.
By having a substantial emergency fund, you can weather unforeseen circumstances without derailing your long-term financial goals. Make sure to take into account the effects of inflation when deciding how much to save.
