5 Golden Rules of Retirement Planning in 2025

Earlier, there was a time when people used to retire between 55 and 60 years. During those days, the economic situation was different as opposed to what it is now. Now the average life expectancy for males and females is also increasing; people now-a-days work beyond the age of 60 years. This is to ensure financial security for the dependent family members.Our parents and peers always advise on how crucial it is to have adequate savings. This is because they know that in today's scenario when the inflation is uncontrollable, the standard of living is surging, healthcare costs are increasing, etc., all these factors could impact your finances at the time of retirement. Retirement is the phase when you don't want to mess around with monetary issues, and everyone expects to live a stress-free life without any financial worry. This is only possible when you do retirement planning.

is a process of earmarking your income goals for retirement years and taking steps to accomplish the goal. When it comes to planning for life's golden years, people are always facing confusion about when is the right time to prepare for retirement. It is best to begin at an early age. Let's understand this with an example.For instance, Mr A is a 25-year-old, and he plans to build an estimated corpus of Rs. 2 crores. He plans to retire at the age of 60. For this, he starts investing Rs.3,500 per month at the interest rate of 12% and accumulates more than his targeted amount, i.e. Rs. 2.5 crores. However, he wouldn't be able to achieve the desired corpus if he delays this by five years. Beginning to save from the age of 30 years, he can build only half of the corpus that is Rs.1.2 crores by the age of 60. This indicates that the early you start planning, the better.Early age is just one of the factors for accumulating wealth for retirement. You can make the process of retirement planning a little easy if you follow these five golden rules; these include:

1. Plan for more than you need When it comes to retirement planning, you need to evaluate how much income you will need at the time of retirement. Note that while earmarking your income for retirement, it always should be more than what you need. To have a great retired life, you will need 70% to 90% of the current income. For instance, if you're earning Rs.70,000 monthly, your monthly earnings at the time of retirement should be nearly Rs.49,000 to Rs.63,000 per month to lead a financially stress-free life. If you're targeting 70% of current income for retirement, savings is not enough. You should start investing.
2. The 4 per cent rule The rule of 4% refers to the withdrawal rate. Regarding this rule, experts further explain that a retiree who invests 50% in bonds and 50% in equity will not outlive the funds if he/she withdraws 4% from the account in the first year. After that, the withdrawal amount is then adjusted as per inflation rate in each year. The rule is based on the assumption that the portfolio should last for at least 30 years.
3. Start retirement early Going by the 4% golden rule of retirement planning, if you withdraw Rs. 1 lakh in the first year of the retirement, you need to build a corpus of Rs.3 crores. To reach a target such as this, you need to start saving right in your 20s. In fact, you can venture into investments that would fetch high returns due to the power of compounding.
4. Reverse Mortgage Many people often invest in a property to secure their future as real estate is known as the safest and best option for a regular income stream. This is common in India. You will find that seniors pledge their real estate property to banks or financial institutions in order to get periodic payments/income, which is also known as a reverse mortgage. The bank uses this property to disburse a loan amount by assessing factors like the demand for property, the current price of the asset, and its condition. The reverse mortgage loan ends when the owner dies or decides to sell the house. If the owner dies, their children can have a right over the property by repaying the loan, or the bank takes the possession. Note that such gains are entirely tax-free.
5. Post Office Monthly Income scheme Post Office monthly income scheme is a secured scheme as it is backed by the Indian government, and it is recognized by the Ministry of Finance. It commits to offer fixed returns on investment. In terms of retirement planning, it is a safe option as compared to other equity shares and fixed-income securities. When you open a monthly income scheme, you can invest a maximum of Rs.4.5 lakh with a lock-in period of 5 years. Withdrawal during the lock-in period attracts penalty, depending on the time of redemption.

To enjoy the golden years of your life, you need to plan it very cautiously. Follow the below steps:

• Step 1: You need to define your retirement income goal.
• Step 2: Assess your current financial situation.
• Step 3: Estimate the amount of money you will need for retirement and try to build a corpus more than you need
• Step 4: Identify a suitable retirement plan. If you are actively putting your money in Provident Funds and Saving account, then you also need to explore investment options to get recurring income post-retirement
• Step 5: Set up a system which will generate regular income from the retirement corpus

Now that you know the golden rules of retirement planning, every financial need can be taken care of with confidence."

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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