The retirement period holds significant importance in everybody's life. After decades of dedicated work, you finally get to start the second chapter of your life. Perhaps you want to travel with your spouse, finally, explore your interests, or simply enjoy some quality time with your family.
The post-retirement period might look different for everybody, but one thing that we all need to focus on is solid financial planning. With retirement comes a lack of regular income, or worse, no income at all. This can be challenging and can affect your plans for a fun and comfortable retirement.
This means you need to start planning today, as a working professional, to ensure you have enough corpus to sustain your lifestyle and achieve financial freedom. Not sure where to begin? Here we bring you a retirement checklist to plan your brighter future.
1. Decide your retirement age
Before you start planning your finances, the first thing to check off your list is your retirement age. When do you plan on retiring? And how many years do you have to build a substantial corpus? Estimating your retirement age is a critical first step, as it lets you plan your expenses and investments much better.
Here, it makes sense to factor in the prevalent life expectancy rate to figure out how much you need to live comfortably post-retirement. For instance, if you are 35 years old with a life expectancy rate of 80 years (based on various medical, demographic, and family factors). And if you wish to retire at 60, you need to plan for 20 years of your post-retirement life.
2. Establish your retirement budget
Once you determine your retirement age, it's time to plan how much funds you need. For this, start by evaluating your expenses. This includes household expenses, rent, travel, child's education, entertainment, credit card or loan EMIs, and so on. In addition, consider any other financial goals you might be put off till after retirement – maybe you want to travel or learn something new.
Moreover, don't forget to factor in the inflation rate to determine how much these current expenses will amount to in the future. Most financial experts suggest having 80-90% of your annual pre-retirement income as your retirement corpus.
3. Start a savings fund
For a financially brighter tomorrow, you need to keep an eye out for unnecessary expenses and maximize your savings. Since the retirement period is marked by the absence of income, it is important to start saving as early as possible to have a big enough corpus ready when you retire.
This involves creating a savings fund and planning your investments. Consider setting up automatic transfers from your salary or current account to a separate savings account. And make sure to contribute as much as you can regularly to reach your goal faster.
4. Protect yourself financially against illness with health insurance
You might not be in the prime of your health as you enter this golden period. And given the rising healthcare expenses even today, it'll not be a surprise if it's the biggest expense you see post-retirement.
As a result, it is a good idea to start early and protect your finances against critical illness with health insurance. Health insurance will help cover the higher costs of hospital, doctor consultation, diagnosis, and more in case of any serious illness. This will ensure you don't drain your savings or investments in coping with a medical emergency.
Before you choose health insurance, understand the terms and conditions as well as the amount you're expected to pay in the form of premiums, charges, deductibles, and so on. This will help you plan your current expenses better.
5. Invest wisely and diversify
Next on your checklist are investments. Depending on your financial goals and risk appetite, start looking at profitable investment avenues to plan for your retirement. You can look at different investment tools, such as stocks, bonds, mutual funds, or real estate.
And while you're at it, it is also important to define a well-balanced, diversified investment portfolio. For instance, certain assets like equities offer you better inflation-adjusted returns. On the other hand, fixed-income instruments are more stable, while gold can bring a store of value.
Since it can be a tricky business, as not every investment class may not be suitable for you, you can seek financial expert guidance and start investing wisely for a better retirement.
6. Pay off your debts
Finally, to plan for a brighter retirement, it's always a good idea to bring down your debt as much as possible. This includes any credit card debts, big home loans, or any other loan. Think about it; you wouldn't want to enter your golden period with the burden of large debts.
There are two ways to do this. You could either start by paying off the smallest debt first, for instance, outstanding credit card debt or a personal loan. Or, you could consider paying off the debt with the highest interest rate first. This will help bring down that costly interest component and make it easier to manage these debts as you plan for your retirement.
The takeaway
When it comes to planning for your golden years, wise financial choices today can help you make your future brighter and lead the comfortable post-retirement life you've always dreamt of. So, start creating your retirement checklist based on your goals and future needs.
And when in need of expert guidance, reach out to us at Tata Capital Wealth. Our financial experts will help you every step of the way, from planning your retirement corpus to crafting and managing your portfolio.
Get in touch with us today!
12 April 2023
5 mins read
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