Retirement is one of those inevitable phases of life, which marks the end of our careers that we have built over the years by acquiring skills and constant hard work. Assignments, deadlines, meetings etc. soon get replaced by holidays, pursuing new hobbies, and spending more time with family. While some people look forward to this relaxed and stress-free life post retirement, some get worried about the loss of a steady source of income.
If you do not prepare yourself financially, retirement can be quite depressing for you and your family. Retirement is a time when income drops and expenses rise. So, financial planning is required for leading a financially independent life even after retirement.
Financial planning simply refers to saving up money for the future. A number of people start saving for retirement without knowing how much they will need to maintain their standard of living after retirement.
So, if you have already started your retirement plan, ask yourself one simple question,“Am I saving enough for my retirement?”
In order to beat inflation, both savings and investments are very important
Inflation is the general increase in the price of goods and services. As years pass by, inflation eats away at the value of your money. In order to beat inflation, you need to not just save but invest as well.
The following are three basic rules of thumb for a successful retirement plan!
1. Start Early
The earlier you start saving for the future, the more money you will have in retirement.The more you procrastinate on your retirement planning, the more money you will have to contribute in order to achieve your retirement goal.
Another advantage of starting early is that you can take risks in your investments. Equities, for example, are risky but it may offer a very high return on your investment. If you want higher return from equities, you may need to stay invested for as long as possible.
2. Invest in Various Avenues
There are many different investment avenues that can help you grow your money. Mutual funds offer high rates of return on investment, though it requires constant market monitoring to keep your money safe. ULIPs or Unit linked Insurance Plans may be good investment products as they offer the dual benefit of investment and insurance. Also look into investing in real estate, which can still provide you a steady check while retired.
3. Stay Invested
(This has been mentioned but needs to be explained further because of how important it is.)
Have patience and stay invested.
Equity investors, for example, may lose faith in their investments as the initial return often looks disappointing. But if they stay invested for a longer period of time, equities usually offer a high return.
Unit-linked pension plans can be best for successful retirement planning. These plans allow you to choose from various fund options based on your risk appetite. Based on market fluctuations, you can switch and redirect your funds. You may be able to choose to pay your premiums on a monthly, quarterly, half-yearly or yearly basis. It will allow you to make investments in a systematic manner over a long period of time for higher returns. In case of your untimely death, your loved ones may be able to receive the the benefits.
Another advantage of a pension plan is that it offers income tax benefits both as the premium and the maturity proceeds. This can be your incentive to stay invested for as long as you earn and are liable to pay taxes.
To Wrap Up!
Retirement is an important milestone in life. Retirement planning, therefore, is a process that should not be left for the later stages of your life. The key to a successful retirement plan is to evaluate your retirement needs, set a financial goal, start early, stick to the plan, and, last but not least, go for products that will not only help you achieve your targeted goal but also protect your money from the volatility of the market.
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