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Retirement planning must take into consideration factors like current age, annual income, current investments and monthly expenses. Plan to retire at 40 and travel the world? You need an iron-clad retirement plan that will see you through your golden years. Research suggests that most people have only a vague idea of how much money they would need on retirement. In their productive years, most Indians shoulder the healthcare costs of both their parents and also support dependent spouses and children.With returns on long term savings stymied by low interest rates, middle-aged individuals as well as professionals closer to retirement need to realistically assess how their retirement goals.By answering a few simple questions, you can build a fair estimate of the actual amount you’ll need to save for retirement. 1. Age: How far along you are in your career will play a key role in deciding how much you need to invest. To leverage the power of compounding, it is best to begin investing for retirement as early as possible. A 25 year old investing Rs. 5000 a month till he reaches retirement age has a distinct advantage over someone who starts retirement planning at age 35, in terms of returns.The older you are when you begin planning for retirement, the higher the need for investment. 2. Income: By the age of 40, you could be earning more than 64% of your average lifetime earnings, according to research. At this age, most personal life goals such as marriage and buying a home are fulfilled. This gives you greater flexibility in terms of allocating savings towards retirement. If you’re younger, you have the advantage of investing a smaller amount and scaling up gradually. 3. Monthly expenses: Your monthly expenses rarely remain constant. Rent, utilities and personal essentials apart, you also need to consider the education and entertainment expenses of your children. The amount you manage to save after satisfying your various needs is another key component of an objective retirement plan.A simple excel sheet works well when it comes to tracking your monthly expenses. Alternatively, you can also use a mobile app for this purpose which can give you interesting insights into your spending habits and help you identify expenses that can be cut back or eliminated altogether.4. Investments: As a salaried professional, you may currently have investments where the returns are less than satisfactory. Other than life and health insurance , you may need to take inventory of any investments that are under performing. A comprehensive review of your investment portfolio can help you reallocate your savings in a more productive manner. For example, an equity Mutual Fund SIP can replace a low interest savings account.Make sure to exclude the investments earmarked for other goals such as children’s education and marriage. This will help you set realistic retirement goals.
DISCLAIMER
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.
