Importance of Retirement Planning

For a moment close your eyes and visualize/imagine, what all you wish to do (or could) after retirement! (take a pause and do this before reading further). 

A few that I think off… 

? Travel to all the places (Hill stations, beach side places etc.) that I could not do earlier due to lack of time or work commitments 

? Spend more quality time with the family, children and grandchildren 

? Spend time on things not able to do earlier…It could be something as simple as watching TV or a cricket match (Without any disturbance or pressure of work deliveries!) 

? Pursue my favourite hobby full time  

? Write the book that I wanted to… 

In brief, you can live the life you want to, the way you want to. You decide what you want to do with your time with no pressures of undergoing a daily grind to work. (If you did this visualization for a few minutes, I am sure that it was really a pleasant experience. If this thought was pleasant, how would the reality be?) 

But however, this is the green side of the story. One must remember that retirement means no more fixed salary or business income. Inflow of money stops, but not outflow i.e. expenses. Except for children education expenses or an EMI outgo, every other expense remains. The biggest chunk could be medical expenses and the second could be doing our passion… i.e. Travelling to different places. 

To really enjoy the green part of the story one must do a proper retirement planning.

PLANNING FOR RETIREMENT 

Why is retirement planning an important activity? 

? There are loans available for almost everything (even to buy consumer good) in our life, except for one thing – Retirement 

? Our friends, neighbors and relatives who were with us till then, may also hesitate to help us – Because we do not have an earning capacity 

? Lastly, we may not depend on their children for retirement expenses 

Considering all this, we see that planning for retirement is a very important priority to enjoy a hassle free retirement life.  

Why is so much hype on this retirement planning? Is it not simple that I save some money when I am earning? 

Yes. That is the idea. Channelize the money in the earning years to create a corpus for the retirement years.  

? So, if one earns and saves till retirement, his/her retirement would be a pleasant experience ? On a bird eye view, it looks that the solution is easy - "Earn for Retirement" is the motto 

BUT UNFORTUNATELY, IT IS NOT EASY… 

? Retirement is like reading appendix portion of a big book, which has several main chapters before that 

? Retirement is at the last phase and there are several life goals (the main chapters.!) that one come across before that 

? Only after crossing all these life goals does one enter the retirement phase 

? So, most of our earnings during the working years would be channelized for these commitments and if not planned well, there would NOT be sufficient for retirement corpus ? Thus, the retirement corpus would not be significant enough to live a life we want 

Considering all this, dedicated retirement planning is very important. 

Ah ok… Retirement is many years down the line. There is sufficient time for me to plan… This very thought is flawed and we will see why it is so. 

? A person starting to work at the age of 25 has retirement 35 years down the line ? So, many do not think about retirement planning in the initial years 

? Most think to plan or face retirement at their age of 45 or 50 or 55, but this is bit tricky: 

o In the current situations, even with all upskilling, we may not be employable beyond our age of 50 or 55 

o So we are on the edge, if we think of planning for retirement at our age of 50 or 55 ? Though appears as the last phase, this is the most important and must be planned from the time you start earning

? One must plan for retirement right from the time you receive the first salary 

? Another reason being… 

o The corpus needed for retirement is quite huge to manage from the savings (Post all expenses and spending on life goals) in working years 

o So, compounding the return is one key powerful tool that we need to use in building our retirement corpus 

o This compounding effect helps build a huge corpus even with limited or less savings