Retirement planning is not a priority in India; with only 46% of respondents believing that is it the most important financial goal as per a survey conducted by IMRB and Reliance Mutual Fund earlier this year. For the average Indian, saving towards a child’s marriage and buying property were prioritised.
With life expectancies rising, as per latest studies by the World Health Organisation (WHO), quarter of the global elderly population will be in India by 2015 and the elderly population will be more than 12 percent of the total population by 2026. India’s 80+ will increase over six times from the existing 78 lakh to about 5.14 crore by 2050. [Source: Times of India, dated September 9, 2015] With those numbers, it becomes even more imperative for individuals to focus on retirement planning.
Simply put, it means a larger number of ‘golden years’ spent in retirement, a time when disposable income may reduce but other expenses such as those towards health care or home help may increase significantly.
Let us discuss some tips that will help you plan for retirement.
Understand how much you need to save
With rising costs and inflation, what is sufficient to run a home today, may not be the same say 20 years hence. Calculate how much you need to save for the long term. For example, a person age 35 plans to retire at 60. Currently, his monthly outgoings are Rs. 80,000. Assuming a life expectancy of 75 years and an inflation rate of 5%, he would need a corpus of approximately Rs. 3.55 crores at retirement, in order to maintain the current standard of living. This translates into requiring monthly savings of Rs. 60,000, starting now.
Rein in spending
While this does not mean cutting back on necessities, consider alternatives to bring down your spending. For example, reducing the frequency of meals eaten out, or shopping for luxuries – if these can be planned more judiciously, you stand a better chance of saving money towards your retirement corpus.
The sooner you start saving towards retirement; you have that much longer in which to build your egg nest. When just starting out with a career, it is likely that an individual may not be able to put aside too much each month, as there could be spends such as buying a house or a car. However, with time on your side, it is entirely possible to reach your financial goals.
It is never too late!
Conversely, it is never too late to start saving either. For example, if someone starts to save towards retirement at age 39, it is likely that he will be able to set aside larger sums of money each month. This is owing to the fact that his basic commitments towards his family have probably been met already. So while the time horizon for investment may not be as long as if he had started to save earlier, the amount of money at hand may make up for it.
Increase your savings when you can
If you think that you are able to put aside some extra money this month, do it! Let’s say you receive a bonus at work. While you may want to (understandably!) spend some of it, it would be wise to set aside even 20% of it towards your retirement corpus.
Seek professional help
If the task seems daunting at first, and you are unable to estimate how much to save and how, it may be a good idea to consult professional financial planners who can guide you with regards to the best investments available.
Stick to your goals
It can be tempting to veer away from your savings plan from time to time. However, by ensuring financial discipline and prudent money management, it is not impossible to stick to your goals. Remember, the more you save now, the more relaxed and financial stress-free will be your retirement!
In conclusion, why compensate on lifestyle post retirement? Instead, explore the various investment options available in the market today. More importantly, identify those that suit you the best, depending on your risk appetite and investment horizon. This will not only ensure your comfort after retirement, but also allow you the luxury of going on your dream vacation or pampering your grandchildren!
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