Retirement Planning

Are you planning your retirement? No... not yet, right? Well, you have "TIME", so chill... there is no hurry...

Really, isn't it? Do you even fathom what the elephant called "Retirement" is all about?

Now, let's decode Retirement for your benefit.        

But before that, answer me... when you close your eyes and think about your retired life, what exactly can you visualize? Is it you chilling somewhere with a book in your hands and a coffee cup in the other while hearing the waves lashing... or going on a hike with a group of young enthusiasts and then taking the next week off only to "unwind" while the rest of your group needs to get back to work... or planning a weeknight party with your friends after a good game of golf... or travelling the world at leisure because there is no real hurry to join back work at your earliest...

I can go on and on and on... about my personal dreams of a post-retired life... but that is also because I choose never to retire... but that DOESN'T mean I will not "PLAN" for my post-retired life...

So, what exactly is "RETIREMENT"?

It is actually a stage of life when I do not have any active financial commitments and I can choose to lead a life according to my own whims and fancies... But me, being me, I cannot "NOT" work... so I have chosen a career wherein I will continue to work as long as my limbs and brain support me... but what if it doesn't? THAT is one of the primary reasons for "PLANNING" my retirement. What's yours?

Is Retirement Planning really THAT important?

With proper planning, retirement lets you enjoy the seven-day weekend, provided your daily expenses are well-covered and you continue to enjoy the same lifestyle. However, there is no single rule that fits all. So, it is highly imperative to look carefully at all the personal and financial aspects before investing.

So, let's answer the "WHY" plan for your retirement at all-wala question:

Some of the key reasons to plan your retirement are:

1. INFLATION... of course. And no, it's not just the figure that the Govt. declares every year, it is MUCH MUCH more because the data is for the whole of India and we come from upper urban India wherein lifestyle inflation is HIGH. And this without considering a "rise" in lifestyle, which again is a reality for everyone.
2. Our dreams and goals are sky-high... travelling and enjoying your post-retired life while living in a bungalow on the seaside would need quite a bit of planning ahead of time!
3. Your child is NOT your retirement corpus! And neither would they be around to provide daily care. So, even though that would cost money, unlike our parents we have been there to provide emergency support!
4. Medical advancements have increased the life expectancy rate and the advanced treatments have made medical costs much higher. So, we would typically live longer and have higher expenses than our forefathers...:)

So, now, it is imperative to know that you need to plan your retirement, like as of yesterday! Here are some of the quick tips that you can follow:

1. Start early. But, if you haven't started yet, start TODAY: Start saving early and make it a habit. Maximise your options by saving more when income is higher and lower during the lean period, refraining from withdrawing from retirement savings, reserving windfall gains if any, etc. Let the power of compounding play its wonders!Some common savings options can be bank fixed deposits, PPF (Public Provident Fund), debt funds of mutual funds, NPS (National Pension Scheme), post office savings schemes, etc. Max out your contribution towards savings.
2. Opt for Tax-efficient Retirement Investment: Choose tax-advantaged savings options for your retirement. Choose the ones that suit your requirements. Ensure your tax liability on post-retirement income is minimised so you don't fall into the double taxation gamut!
3. Automate your Investments for your Retirement: You can automate your personal Retirement Corpus on your own by creating an automatic fund transfer; say, from your savings account to a Retirement Fund or from your liquid MF to a retirement-specific mutual fund, etc.
4. Seeking professional help: Retirement planning for an entrepreneur may be more complex than it may seem on the surface. Seeking help from a financial advisor to make it complete and precise. He may guide you in converting your retirement assets into income. Ask me if you need any help.
5. Estimate your future expenditure: Have a realistic vision of your future income and expenditure. Take into account factors such as your lifestyle, inflation, etc. Keep a contingency fund aside.
6. What’s your post-retirement agenda? What do you want to do once you retire? It could be travelling, spending quality time with family, pursuing another career or working as a consultant in the same industry or in your old company. A lot depends on your decision when it comes to your retirement planning.
7. Review your portfolio and your financial goals to check their alignment: Review your investments regularly. Don’t just put money in your own company, but also consider investing in other companies. This will help diversify your investment portfolio and assets.? Moreover, investment products, such as mutual funds, generate substantial returns.
8. Keep the exit strategy ready: Keep an exit plan ready—whether you decide to work forever or wish to hand it over to a partner or a family member. Zero in on an exit date and evaluate how your retirement may affect your business financially and ways to deal with it.
9. Evaluate your existing assets: Note your existing assets. Assess how you can convert them into retirement savings. Figure out whether you have a substantial amount of liquid assets or does everything depends on your current earnings.
10. Keep Plan B ready: Always keep Plan B ready when it comes to financial planning for yourself and your family.

What’s more?

1. Consider expenses for your child’s higher education.
2. Secure your family’s health with a great health insurance policy even when you are not working so that your medical expenses do not deplete your wealth.
3. Documentation of your investments may help you keep track of your finances with ease. Update your nominee on how to access the funds.
4. Do not push your holiday plans to the back burner. After all “all work and no play makes Jack a dull boy”.

Keeping all these factors in mind, one has to choose and plan for retirement in a very systematic manner. Apart from saving enough for your retirement you also need to invest those savings wisely to reap maximum benefits from those savings.

For the longest time, traditional investments like PPF, EPF, Bank FDs, NSC and Life Insurance policies have been considered ideal for retirement planning as they are lower risk products. But since you have the BIGGEST weapon called time on your hands, do explore equity and mutual funds as that is the only asset class that surely beats inflation in the long run and also helps you generate wealth!

I am a BIG fan of equity as an asset class, but never put all your eggs in one single basket. So, diversify your portfolio but keep investing diligently and systematically to build a healthy portfolio for your retirement!

Bottom line

Retirement is the time when you get an opportunity to enjoy all that you couldn’t do while working. Proper retirement planning makes the transition seamless