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Keep these things in mind while buying a retirement plan to ensure that you have a smooth sailing in your golden years.
While we all are aware of what ‘Retirement’ is and know that one day we will all retire from work, there are few who plan towards it. To be able to maintain financial independence and lifestyle post retirement, one needs to start planning as early as possible. Since retirement is that period of your life when you have time at hand to relax, travel and do things one has not been able to due to hectic work schedules, carefully planned and disciplined actions need to be taken to be able to meet the financial goals post-retirement. Here are some pointers one needs to remember while planning your retirement:
1. Plan retirement early
One of the most important aspects of planning for retirement is to plan it as early as possible. If given a thought, one wonders when is the best age to start retirement planning. Ideally, one should start planning for retirement as soon as one starts earning. Planning it early helps money get ample amount of time to grow. Maybe start small and keep increasing the savings towards retirement as you grow in life.
2. Life expectancy
Due to the medical advancements longevity of life has increased significantly around the world and India is no exception. Though it is difficult to predict how long one is expected to live but by reviewing the average life expectancy in the country and family’s health history, one may get a fair idea. Many a times in the later part of life, healthcare problems significantly increases the medical expenditure because the advancements in medical science help fight various ailments but those medical solutions come at a high cost.
3. Set your targets!
Your savings should not run out while you are alive. Hence while planning retirement make a list of things that will come up post retirement. In many cases responsibilities like daughter’s marriage, children’s education are still pending and of course, do not underestimate your medical needs. This will help you assess your retirement corpus required.
4. Be wise while choosing the right retirement plan
When you are thinking of retirement, it’s about living several years of your life at ease along with financial independence. One needs to be very careful while choosing retirement plans, as the plan needs to be fulfilling your requirements. To be sure one should consult a financial planner before investing in any retirement instruments.
5. Income tax: Pay less
Income tax management is always a part of any financial planning and hence also part of retirement planning. Retirement planning involves tax deferment -- you do not pay tax up to a certain limit on savings for retirement now and pay the tax on annuities which you receive during your retirement years when your income would have reduced and you could be in lower tax bracket as compare to now.
It’s necessary to have an understanding of income tax regulations as this could help you minimise your income tax liability and allow you to have more money in your hand.
6. Let market fluctuation not make you anxious!
Investment in a diversified equity portfolio means that you are taking a calculated risk, not a blind one. By investing in different asset classes you make your portfolio strong. Also, in case you plan to retire early, investing in retirement specific ULIPs is a great option as market linked assets including equity offers superior returns as compared to long-term debt instruments. ULIPs will not only address the concern of inflation, it will also cater to your protection needs.
7. Don’t forget inflation!
The cost of living is always going to move higher, hence while planning retirement one should not forget to add the impact of ‘inflation’. Though senior citizens don’t spend much on food but their medical costs are high and will continue to rise further.
Keep these things in mind while buying a retirement plan to ensure that you have a smooth sailing in your golden years.
V Viswanand is Senior Director & COO, Max Life Insurance