Journey from now till our retirement in tedious, taxing and includes lots of hard work. The money that we earn now and save is going to shape our future, our old age and how much we will be dependent on our next generation to help us.
When we talk about retirement, it’s not only about walks in the park with your partner or sipping the morning tea with a newspaper in hand and no haste to step out of the house for work. This all is only possible if you have planned it right and saved enough to make sure you live the life that you have envisioned.
To have a comfortable and a secured retirement, one needs to plan it right. You surely don’t want to be a liability to your children. So, build on your finances that will fund everything you desire.
Know when you want to retire: First of all, we should know when we plan to retire. If you think you want to retire early, by say at the age of 40 when you are already in your late 20’s, you barely have 12 to 13 years to save up. In that case you will have to spike up your investment amount, save more and spend wisely now to have a better life tomorrow. But if you plan to retire at 60, which is the right age, you still have 30 odd years to build the corpus amount. You can live a good today and also build for a better tomorrow since time is by your side. So, first make sure you know when you want to retire.
Identify what you want: Like any other financial planning, retirement planning also starts with identifying what life you desire once you retire. Because once you retire, your monthly income will stop but your expenses will not. Know your goals and how much time you have till you retire. People dream to go globetrotting with their spouse once they retire, some want to move out of the concrete jungle and return to their hometown or village and live a peaceful live. We all have different desires. But everything comes with money and if we know what we want, working towards it can be easy.
Time in hand: The longer the time for you to retire, the more time your portfolio has to perform. Some people start as early as their first job to invest for their retirement. They don’t want to miss the bus and wait for later years. With time in hand, you can choose to invest in risker instruments like stocks. Also, when you start early, your return can outpace the inflation, allowing you to have your purchasing power during retirement. When you start early and are still single, you don’t have the additional expenses of spouse and child-care, which again allows you to invest more money.
But if you are late, you can concentrate your money in debt-based investments in order to preserve and secure the capital amount. With little time in by your side, you may have to cut down on your lifestyle and variable expenses (to understand variable expenses, read my blog Steps to Budgeting) and invest big chunk of your income into your retirement plan.
Other sources of income: For some, even after they stop working, they have alternate income which keeps coming in every month. Like rental income from a property that you have let out. If you are covered by your company for pension, that would also be an additional income during retirement. You can also take up part time jobs during retirement to rope in some additional income. Such income, outside of your savings is also considered as your income post retirement.
Pay off Debts: When the salary or money is coming in every month, it’s easy to pay off your loans and EMI’s but when that stops and your only source of income is going to be your retirement plan, you do not want to give that amount off to loan or EMI. So, when you have the time, pay if off and don’t let it drag till the end.
Set your plan in motion: You can start investing according to your risk appetite and age. From stocks to debt instruments and even various retirement plans, everything is available in the market to help you secure your future. If you are naive with finance and investments, appoint a financial planner to help you out. They can design a portfolio for you to help you make money by investing in plans and instruments that are best suitable for you.
It always helps to cut down on our expenses and budgeting rightly (read my blog on Benefits of Budgeting and Steps to Budgeting). End of it all, we just want to have a comfortable life. When you have the chance and time, grab that opportunity to invest the money. A bonus, extra income, like rentals or interest income, which you actually don’t need to use right now or when you are in your 50’s and your kids have already moved on in life and your loans are paid, put that extra money in your investments. For what you save now is going to secure your future. And remember, Every Penny Counts.
In my next blog I will talk about pay off debt V/s. pay for retirement.
Till next time
This blog is a part of Blogchatter’s #blogchatterA2Z challenge.