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3 Smart Decisions That Will Help You Plan Your Retirement Better

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Early Retirement

Does it surprise you that saving for retirement in India is less than 2% of the country’s GDP? With studies pointing towards a much faster-ageing population with an estimated 20% of the residents to be above 60 years of age by 2050, this insufficiency of retirement planning is a scary thought.

Why Does an Investor Need to Start Planning for Retirement Early?

Retirement is the last phase of life, and most people tend to postpone planning for their sunset years, even with the joint family structure changing into more nuclear families, the typical family values and attachments are still intact.

No wonder only 33% of Indians save regularly for their retirement, and 58% of Indians have delayed saving or haven’t begun saving for retirement. Despite joint families becoming increasingly rare, you still don’t want to depend on any family members and be financially free after 60.

If you are wondering when it is the right time to start planning your retirement, the answer is now. When you are in your 20’s, 30’s, or even 40’s, retirement planning may be the farthest thing on your mind. Then again, is it ever too early to prepare for a future of financial independence? Definitely not! In fact, the day you start generating an income is the day you should also begin planning for your retirement. Building sound financial habits and compounding savings takes time. An early kick-off gives you a head start. Why? Because you have the ‘age’ advantage.

What Are the Benefits of Having a Plan for Your Sunset Years?

Retirement planning also means many decisions to make. Deciding on how to begin can be challenging. Unfortunately, no universal example will help in modelling your portfolio. No two people have the same financial goals and retirement needs. You may venture into dividend stocks. Someone you know may prefer investing in international markets that offer more aggressive returns, while others may play it safe and invest in traditional assets.

Having a plan can save you from stress, both mental and financial. It can let you support the lifestyle you are habituated to and help you fulfil your goals, whether travelling or getting a second home.

Having said that, the critical decisions to focus on are:

Finding your Retirement Corpus

It is difficult to reach your destination if you don’t know where you are headed. The same rule applies to your planning for later as well. You must set a target to ensure that you are well looked after and comfortable in the second innings of your life.

Diversifying your Asset Allocation

Don’t make the mistake of putting all your eggs in one basket. Instead, the mantra is to diversify your portfolio to minimize risk considerably.

Explore different asset classes like stocks, bonds, and cash. You can also consider a mix of equity and debt and combine it with gold to balance your portfolio. A combination of short- and long-term growth assets ensures the risk on your investment whilst offering your other routes of income and returns.

Getting insurance for life and health

Insurance is a must-have in any retirement plan. As you age, having adequate health insurance will certainly put your mind at ease. Add a personal accident and critical illness policy to it, and you are completely covered from a health perspective. You must carefully assess your risk appetite and the number of years you have left for your goals to fruition. Doing so will help you save enough, considering the cost of living seems to rise yearly.

What are the Disadvantages of Not Investing Early?

Meeting life goals can be a race against time. Therefore, most finance pundits recommend starting your investment journey towards retirement planning as early as possible. Here’s why.

Healthcare is Expensive

Healthcare costs continue to rise and will be one of the most significant expenses after retirement. And then there is inflation to consider as well. Government data suggests that there has been a rise in medical expenditures by 14% since 2010. As medical science evolves, so will the costs.

Experts recommend buying a comprehensive health plan. Purchasing it as early as possible is suggested as your options will shrink with age. However, you will not be subjected to a higher premium, but you will also have limitations on the sum insured. Also, you must remember that health policy can be used only towards hospitalization. Generally, pre-and-post hospitalization bills are reimbursed for up to a fixed number of days. So, Rs. 15 to 20 lakhs are the approximate corpus for medical expenses you must aim for after retirement for a couple in addition to your health plan.

Increased Life Expectancy

With access to quality healthcare, overall life expectancy has been on the rise. It implies that you may lead a long life after retirement and need a more significant savings corpus to help you sail through comfortably. A longer life span has also given rise to added life goals. You must be financially ready to meet all these goals.

Disciplined Investing Inculcates a Savings Habit

A disciplined approach to investing is an absolute must if you intend to accumulate a corpus that will take care of all your finances post-retirement. There are many retirement investment plans like National Pension Scheme that you can explore to reach your life goals during your sunset years. Make sure you choose your asset classes wisely and within your risk appetite.

Final Thoughts

Your retirement planning must start today if you wish to live comfortably later. However, retirement can be a happy state when you are on track with your life goals.

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