Retirement Planning is most important part of your life. Retirement Planning

Nothing is permanent in this world. Everything that comes will definitely go including us. But we don’t know when. Apart from this everybody would like to live life peacefully as long as they live. You have to decide whether you want to depend on somebody or live on your own without compromising your life style throughout your life. That is why it is best to put our best efforts and save more for the future. The important thing you have to begin with is to have a retirement plan for you today. Retirement Plan is very important in our life. The earlier we construct the structures to attain a wonderful retirement the better for us. Saving for your retirement is one of the toughest and most vital things you will do in your working years. Because you have to save for your children's college education, paying your home loan, children’s marriage, buying cars and all the other everyday costs.  Everyone has their own retirement dreams as well. The thumb rule is that you will need approximately 70% to 80% of your pre-retirement   income   to maintain your lifestyles in retirement. However, depending on your own situation and the type of retirement you hope to have, that number may be higher or lower.

There are lot of factors one should consider for retirement savings.

Retirement Age: This is the first factor you should consider at what age you expect to retire? In reality people say that they will work even after retirement from current job. Here you have to consider like health problem, job instability, or change of workplace etc. Assume that your retirement age is 60 then earlier you retire you need more money throughout your retirement life. It is best to prepare for unanticipated events that may force you for an early retirement. Life Expectancy: Nobody knows the life expectancy. There are few factors which may give     you a hint. Your family history – like your parents and your relative's current age or how long they lived. Common diseases in your family.  Your past and present health status etc. These are all the factors you have to consider when calculating your life expectancy. You will approx find the number of post retirement years you will spend. Inflation: Inflation is one of the main factors while you save for your retirement. Just to save for retirement you start saving but forgot the impact of inflation then your savings will not sufficient. If you don't account inflation while saving then inflation will reduce your value of your savings. So it is very important that your saving has to exceed inflation. Your Lifestyle: Different lifestyles are being adopted by different people. Generally Lifestyles are usually simple for most the people. But it is very important that what type of retirement lifestyle you would like to enjoy. Like travel, or hobbies you would like to pursue etc. These are all questions can help you to decide your required corpus for your retirement. Many people tell that they would like to work part time after retirement. But the answer is practically not possible. Health: Nowadays it is very important to consider the cost of health care. Health care costs are rising every year than inflation. People get health insurance cover from employers generally till retirement. Very few offers this after retirement. If you are not taking this in to account then it will eat your savings later. It is better advisable to buy long term health insurance for your better tomorrow.

How much you need at the time of Retirement.

POWER OF COMPOUNDING: If you start investing early for your retirement you can gain the benefit of POWER OF COMPOUNDING!

Let us explain how. Assume if you need to create retirement corpus of Rs/1.5 crs at the age of 60. Today you are 30 yrs old. You have 30 yrs left for your retirement. If you start investing Rs. 2,140 /per month for the next 30 years then assume at the rate of 15 per cent you will have a corpus of Rs. 1.5 crs. Take the other example suppose if you don't start now and at the age of 45  you decide to start investing then to have a corpus of Rs 1.5 crs you will require an investment of Rs 22,160 per month!  Now see the power of compounding! The benefit of starting at early age is you have the TIME with you and you can save with small amount and still you can achieve the retirement corpus. How to calculate your retirement corpus:

The following factors are taken in to account when calculating your required retirement corpus .

Your Life expectancy and years left after your retirement. Expected return on retirement corpus. Inflation rate. Your expected monthly/yearly expenses. Then after calculating your required retirement corpus we have to find how much money you have to save to get that required retirement corpus.  The following factors are taken in to account.

How many years left for retirement?

Expected rate of return during this period Available current investment corpus.

After considering all these points you should have a better understanding of how much corpus required at the time of retirement.

Don’t spend your retirement years by depending on somebody. Plan now and start investing to reach your retirement dreams.

Thanks & Regards,

NITIN L. GHADGE