The Importance of Retirement Planning

You love reading books, cooking up a tasty meal, walking barefoot on the fresh grass in your lawn and even making small wooden figurines. As hobbies, you indulge in them whenever you get the time. Now that you are working, sometimes you feel that the time you get for these activities is not enough. Your dreams of retirement are filled with the serene thoughts of you being immersed in your hobbies all day long. But wait, what about the funding that is required to support these hobbies? Since you are retired, you no longer have the regular income that used to magically pop into your bank account at the start of every month? Have you planned for that? More importantly, what do you plan to spend when you have a wife, kids and grandkids and no job? The future starts looking bleak, doesn’t it? Well, read on to find how these fears can be allayed.

It’s imperative to understand that retirement planning is based majorly on the amount of savings one can manage to have. Needless to say, one can save better earlier on than later in their life. With financial liabilities lesser in the earlier part of life, even though small, savings can be done effortlessly and in time, they reduce the burden of saving more later on. Savings if properly invested could grow at a compound interest rate of 8% per annum and generate great returns at the time of retirement. Considering that one’s savings alone will be enough for retirement is a myth. Inflation and rising cost of healthcare are the greatest impediments to a hassle-free post-retirement lifestyle. Only a systematic planning and revision of one’s retirement plan will allow one to change with the pace of the market.

The key pointers to bear in mind while planning for retirement are as follows :

1. Using a retirement calculator and finding out the human life value is a great idea here. One should bear in mind points such as increasing medical costs and vacations. But aspects like children's education and rent will be having less of a burden, the last one only if you own your home. Based on that, the HLV will indicate what amount of income you need post retirement
2. No day is better than today when it comes to saving. The more funds you allocate to your retirement corpus, the better. But don’t push yourself so hard that you are stuck between expenses. Save what you have and plan the next month better to save even more
3. An appropriate annuity plan can work wonders for you. Even though you might depend more on your savings and investment, an annuity payout can take care of the rent or sundry expenses for a month
4. The earlier you save, the better rates you get. It is highly unlikely that banks and other institutions will offer better interest rates on deposits as time goes by
5. Investing in a mutual fund through Systematic Investment Plans is a great idea and it really helps build on your corpus, but make sure you keep an eye out for the occasional high tides in the market

Life insurance, health insurance, proper investment and regular savings are keys to having a relaxing retirement lifestyle. Make sure you keep these points in mind before trying to splurge on that new wristwatch