RETIREMENT PLANNING: AN ESSENCE OF FINANCIAL PLANNING

 


We remember most of the iconic Bollywood movies with their memorable dialogues. Same goes with the dialogue, “Picture abhi baaki hai, mere dost.” We can easily relate this dialogue to real life, when we talk about retirement. Retirement is not the end of life; rather it is the beginning of the second inning of life.

Another dialogue we may remember, “Zindagi badi honi chahiye, lambi nahi.” But what will happen if we live a life longer than expected and don’t have a planned corpus to take care of our financial needs and lifestyle maintenance? Hence, it is very important to plan for it in advance to avoid a crisis later.

“Tareekh pe tareekh, tareekh pe tareekh.” We tend to keep on postponding the decision, when it comes to starting saving for retirement, thinking that we still have time to think about it. Early planning for retirement is always advantageous in bringing you closer to the required retirement corpus. The money you pooled grows significantly over time with the power of compounding. Hence, it crucial to decide on the “right tareekh” to start planning for it.

Retirement planning is the process of analyzing and determining your financial goals and strategizing a plan to achieve those post-retirement goals and objectives. Hence, retirement planning is an essential part of financial planning in every individual’s life cycle. It involves setting financial goals, creating a budget, managing assets and liabilities, and investing in diversified assets. It ensures that you have enough corpus to maintain your lifestyle and meet the end-to-end needs of life.

It is always suggested to plan it now because “Kya pata, kal ho na ho”. One should create a roadmap to achieve their retirement goals and objectives through proper financial planning.

Important steps to consider when creating a retirement plan: 

  • Setting retirement goals:  Estimate how much corpus you will need to support that lifestyle, considering what kind of lifestyle you would like to have during retirement.
  • Retirement expense estimation: Estimate how much you will require to fulfil your post-retirement goals and objectives, such as living expenses, healthcare expenses, travelling, hobbies, etc.
  • Identify sources of income: Determine the sources of income from which you can generate post-retirement income, such as social security, personal savings, pension plans, etc. 
  • Current savings and investments evaluation: Keep track of your portfolio for evaluating your current savings and investments to check if you are on track to meet your retirement goals and objectives.
  • Savings for retirement: Create a tax-efficient savings and investment plans using tax-advantaged retirement accounts like 401(k)s and IRAs to maximize the retirement corpus to meet the retirement goals.
  • Review and recommendation: Regularly review your retirement plan to make sure you are on track to meet your goals. Adjust your plan as needed to account for changes in your financial situation or retirement goals.

Retirement planning is an ongoing process, and it plays a crucial role in creating a financially independent post-retirement life. It's important to start planning for your retirement early to give yourself the best chance of achieving the required corpus to fulfil your retirement goals. A financial advisor or financial planning professional plays crucial role here in creating, implementing a sound retirement plan that is tailored to your specific needs and goals, as well as regularly reviewing and recommending measures to keep a track of your planning and investments and possible modifications as and when required.

You must be familiar with another significant dialogue from Bollywood, “Aaj mere pass ghar hai, gaadi hai, bangla hai, property hai, bank balance hai.” We can relate this dialogue very well with importance of diversification of retirement income through diversification and asset allocation. If we relate this to the retirement planning, it is important to note that one’s retirement income should comprise of at least three-four different sources. Investing in different types of assets, such as stocks, bonds, and real estate, can help to diversify your portfolio and potentially increase your long-term returns. Having diverse source of income is a good way of reducing dependence on any one source.

“Har kahani ka happy ending ho sakta hai.” Overall, retirement planning is an essential part of financial planning, and it's crucial to start planning early to maximize your savings and achieve your retirement goals. Hence, if we plan for retirement goals early and properly, we will be financially prepared to begin the new chapter of our life post-retirement and can live life king size with joy, happiness, and financial freedom during the second inning of our lives.

Happy Retirement

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