Retirement doesn’t mean you retire from life. This is an opportunity to try something new, travel to new places, etc. For all the needs you need to build a retirement Plan, which should be started early to accumulate sufficient money.
Retirement planning is an important aspect of financial planning. For deductions done towards payment of premium of retirement plans, benefits are available under Section 80C and 80D of the Income Tax Act.
Steps in retirement planning
- Set your retirement goals.
- Assess your current financial position.
- Identify retirement income sources.
- Evaluate retirement risks.
- Understand health care issues.
- Invest your retirement assets.
- Manage your retirement income.
- Monitor your retirement assets.
Points to be considered for retirement planning
Develop retirement budget :
Look at what you are spending currently in major categories like groceries, medical, eating out, etc. They may change but you will have an idea of the normal expenses. You need to factor inflation at around 3-5% per year.
Reduce Debt :
As the retirement period approaches, reduces your debt as much as possible including mortgage debt. The less number of obligations you have, the more you will have for personal expenses.
Unforeseenmedical expenses :
Old age typically brings medical problems and increased healthcare expenses. To prevent any unforeseen illness consume your entire retirement corpus, you need to buy a medical insurance.
It’s nevertoo late :
If you are starting late, make sure that you cover up for the lost time. It will be easier to sacrifice now compared to later.
Invest for the future :
Employee’s ProvidentFund is the most popular retirement saving instrument in India. National Pension Scheme has an annualized return around 10% for 4 years, it also provides tax benefit under sec 80C.
Equity is the best instrument for long term investments, the returns are high when invested for long time horizon.