Retirement planning means managing your finances to get income after retirement too like pension. Everybody has different lifestyle, responsibilities. One has to prepare for unforeseen health emergencies in old age. So, one has to decide how much he will need in his old age after retirement. Here are some practical and essential tips for a smooth retirement journey in India, covering financial, health, lifestyle, and emotional well-being:
Plan Finances Early
- Start saving early: Very interesting question arises in mind that from when i should start planning and investing for retirement. According to expert, one should start retirement planning as soon as he gets his first salary but one has different dreams and planning in young age. But you should start investing as early as possible. Use instruments like PPF, EPF, NPS, and SIPs in mutual funds.
- Build an emergency fund: Emergency doesn’t knock and come in your life. One should always make arrangements for emergency situation like health problems. How much a retired person keep amount as emergency fund. So, he should keep at least 12 months of expenses as emergency fund.
- Clear debts before retirement: Every person takes loans for some other reason like home, marriage, car, etc. So, loan has to be settled through EMI. So, every month EMI goes from your salary. Avoid EMIs in your retirement years.
- Diversify investments: “Diversification is a means of controlling risk. It’s never owning too much of any one thing.” A quote by Charlie Munger. Investments where returns are high carry risk as market is volatile. For example, stock market. So, mix of fixed deposits, mutual funds, real estate, gold, and senior citizen schemes is a better option so you don’t have to bear the loss if any of the market does not work well.
Select for Retirement-specific Schemes
- National Pension System (NPS): National pension scheme (NPS) is an initiative by central government of India which provides regular income and tax benefits to investor post retirement.
- Senior Citizen Savings Scheme (SCSS): Senior Citizen’s Savings Scheme (SCSS) is a post office saving scheme for senior citizens backed by government of India. It pays regular income in the form of interest
- PM Vaya Vandana Yojana (PMVVY): The Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a financial initiative where the policyholder will receive an assured return of 7.4% annually for the policy duration.
- Post Office Monthly Income Scheme (POMIS): POMIS is post office scheme where investor has to invest certain amount and gets fixed interest every month. Interest rate is decided periodically by the government and it is a low-risk plan.
Maximize Compound Interest
- One of the reason to start retirement planning early is the earning of your investment start earning which goes on and the investment gets bigger with time. For example, if you earn some money in some type of investment like mutual fund, then you can invest the earned money again in mutual fund or somewhere else and earn more money.
- Investor should try not to withdraw money as it reduced capital and future compounding too. Try to use other investment for near term needs.
Get Legal & Financial Documents in Order
- Create a will or estate plan. It provides how your properties and money will be managed and distributed after death.
- You have to nominate beneficiaries for all accounts, investments.
- Organize important documents like property papers, insurance, Aadhaar, PAN, bank details.
Utilize Government Benefits & Concessions
- Many airlines offer discount on airfare to senior citizens.
- Senior citizens get discount on certain healthcare services.
- Take advantage of travel concessions, tax benefits, and special queues for senior citizens.
- Use Aadhaar and PAN linking to avoid hassles in pension or banking.
Consult a Financial Advisor
Financial advisor has detailed knowledge of each and every form of investments. He can determine what kind of investment will suit you by taking details like financial goal, responsibilities, life style, etc. So, its always advised the expert opinion b4investing.
Takeaway:
It is very essential to plan finances for your retirement. There are lot of options available for investment. But, you have to calculate the return and how much money you will need in old age. If you have doubt or if you don’t understand how much you will need in old age, you can contact financial advisor.
