There are a lot of online calculators which help with retirement planning. I was browsing through one of the articles on it. The calculations suggested that if your current expenses are Rs. 60,000, it would be around Rs. 4.6 Lakhs in 30 years considering a realistic 7% average inflation rate. To fund such a retired life for around 20 years, post active service would require around 9 Crore rupees.
Its alarming and sounds huge now. It is however possible with disciplined investing and leveraging the power of compounding of your investments with time.
A few things to do to ensure a happy retirement life is as below:
1. Set an objective: If you are a youngster today, you will get married, have children, may buy a house etc. The expenses will increase over the years and it may not necessarily be proportional to rise in income. We tend to take care of immediate needs and put retirement plans on the backburner. It is advisable to not do so and set an objective on the amount required during retirement. Depending on the years of active service that you have, do set an objective to attain a retirement corpus. Take into consideration aspects such as your children’s education, marriage, the healthcare needs of the family, buying a house etc. Also, consider the inflation and other macro factors and then arrive at what you and your spouse would need as a corpus to spend nearly twenty years of your retirement life comfortably. Set an objective to attain the same.
2. Make a plan: Whether you have just started working or are twenty years into the job, you need to plan your retirement immediately. Based on the estimated retirement corpus, you should plan to invest your savings into prudent avenues. Please do seek the help of a certified financial advisor unless you are one yourself. A financial advisor will not only help you to save more by looking at ways to save on taxes, and reshuffling your investments, he would also be able to calculate your retirement corpus much better. The advice would help you to ensure that your investments are placed in the right avenues and your retirement objectives are realized.
3. Create a savings chart as per the plan: Once the plan is in place, you will have a clear idea of the funds you need to save for investing into the retirement bucket. Make a savings chart accordingly and ensure that more than 10-15 % of your investment is parked into savings that can help you retire well. If you can save more, do so and park additional funds into your retirement corpus to enable you to retire early if need be.
4. Never withdraw from your retirement corpus: The golden rule is to never withdraw from your retirement corpus. This would ensure that the money you have set aside is subject to the power of compounding and you will have sufficient funds as per your retirement objectives when it is time for you to retire.
With retirement planning, the best results can be achieved if you start young. If you haven’t started, then the best time is now!