How Should One Plan for Retirement?

 How Should One Plan for Retirement?

Retirement planning should be included in the financial plan by anyone who wishes to build a financial cushion for their sunset years. To plan retirement, one first needs to start thinking about their retirement goals. One also needs to analyses how many years they have and had before they retire so they can plan their investments accordingly. Investment planning for retirement is essential because we need to invest a certain portion of your savings so that it grows in the long run and helps you create wealth. There are several traditional as well as modern investment schemes available to target goals such as retirement planning. You can even save some tax bile investing for retirement if you consider investing in Equity Linked Savings Scheme (ELSS). ELSS is a tax saving mutual fund scheme that comes with a predetermined three-year lock in period.  The three-year lock in gives investments and opportunity to grow over stupid its period at the same time investments in equity linked saving schemes continuous investors to bring down their type’s liability. One can invest up to Rs. 1.5 lacs per fiscal year in ELSS and submit this investment for tax benefit.

Here are simple steps to retirement planning

Understand your risk appetite

Remember we give the example of investing in equity linked savings schemes for retirement planning? Investors should understand that ELSS is an equity linked scheme thus carrying a high-risk profile. If you invest beyond your appetite there is a chance of your investment portfolio incurring losses. So, while making investment decisions for targeting retirement corpus investors should ensure that they invest in a scheme whose risk profile aligns with their risk appetite.

Evaluate your existing investments

You may have already invested in some retirement schemes like the National Pension Scheme or Public Provident Fund. Your employer too may have opened an EPF (Employee Provident Fund) account for you where every month a predetermined amount might be getting deducted from your monthly salary. While considering new investments, investors need to evaluate their existing investments so that they invest adequately for the future.

Start a Systematic Investment Plan

If you plan to invest in a mutual fund scheme like a retirement fund to accumulate wealth for your sunset years, consider starting a SIP. A Systematic Investment Plan abbreviated as SIP is an easy and convenient way to build wealth. If you do not have a large surplus to invest in a retirement fund, then you can invest small amounts at periodic intervals if the minimum investment amount is met. Not everyone can afford to make a lump sum investment and hence, SIP allows even those with low income an opportunity to build wealth over the long term. If you aren’t aware about how much you need to invest on a monthly basis to meet your investment objective, then you can refer to an online SIP calculator.

Invest according to your investment horizon

Just like determining the right investment amount is essential in retirement planning, one also needs to look at the amount of years they have in hand in order to build wealth. Some traditional retirement schemes come with a lock in period that may span anywhere between 5 to 15 years, sometimes even more. Hence, investors need to first find out how many years they have in hand before they retire and then choose a feasible retirement scheme accordingly.

When you are deciding an execution strategy for retirement planning, investors should keep their goals in mind. Do you want to save to meet your daily ends, or to take care of your medical expenses? Or do you already have that planned out and want to go on a world tour with your partner post retirement. Having a clear perspective might help you plan your retirement smartly.