Each of us wants to live our old
age without any tension, doing things we never did, because we are bound by our
commitments. Commitment to take care of our parents, Commitment to provide good
care and education to our kids, commitment towards work, and the list goes on.
And while fulfilling all these commitments most of the times we undermine the
commitment towards our own self.
Let me ask a fair question? How
many of us do really think of Retirement? And, even if we do think of
Retirement, how many of us are preparing for it? Everybody knows due to better lifestyle,
life expectancy is increasing. Let’s say if we work from our age 25 till 60
i.e. 35 years of work, we also need to prepare ourselves for another 25 years
of no work (assuming life expectancy of 85). So, are we preparing for this
Retirement of ours? If not, we better start now otherwise we will have to work
post 60 to provide for ourselves. On the counter argument, some of us might
like to work beyond 60 also. That’s a great thought. But, will we be able to
give in same no. of hours like we do today. And most of us don’t even have
pension which will fill the gap.
So, let’s start with our
Retirement homework and be better prepared. What are the points we shouldn’t
forget while doing our Retirement Planning.
Inflation: Inflation is the silent killer here. Many a times we
keep saving without considering the impact of inflation on our savings. Though
our savings are increasing in the instrument where we have invested them, but
the cost of goods we use is also increasing at almost same pace. Let’s assume
you have taken a FD @ 7% and current inflation is 6%. So, on net basis your
savings is just earning 1% over and above inflation, which is not that great.
Employee Provident Fund: EPF is a retirement benefit provided to
salaried employees. It is a fund to which both employee and employer contribute
to the tune of 12% of the employee’s basic salary. Ensure that as and when you
change job you should transfer your old Co.’s EPF to new Company, as it one of
the major contributors towards your Retirement.
How near/far your Retirement is: We need to manage our savings
towards retirement depending upon the tenure of this goal. If it is still good
30-35 years for your retirement, you can invest in equities to take advantage
of better returns over long term. And, if you are nearing your retirement it is
better to keep the major portion towards debt instruments to preserve the
corpus.
Backward Calculation: To be very true, many of us don’t know what
kind of shape our life will be in during our Retirement. So, it is imperative
to do backward calculation. Understand your lifestyle in your current position.
Discuss it with your wife, and see it will work in your Retirement years. Will
expenses remain same? For e.g. medical costs will increase for sure, there
might not be any education expenses on you, and things like that. Calculate how
much lump sum you will require to keep you going through those non-earning
years. Any Financial Planner will be happy to calculate that for you.
Charu Hastir, CFPCM is founder of www.theriteplan.com. Rite plan is an online financial planning
portal created to achieve a single objective of providing easy and Do It
Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun
Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/
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