Importance of Retirement Planning

Dear readers,

Retirement planning is very important part of the one’s financial planning. We should not ignore it. In our country joint family system was very much popular and due to this system most of people often did not made any proper retirement planning and was totally depend upon their family member. In last two decades due to massive urbanization, social norms are changing very rapidly and nuclear family system is spreading day by day. People are settling in big cities from villages. So there are very big question is who will take care of the people in their old age and from where they will get  financial support for daily living.

Now it has become very clear that retirement planning is very essential for all of us. Most of financial advisors suggest that you need less money for post retirement expenses. According to these advisors, you need only 70%-80% of your pre retirement expenses in your post retirement period. When you are preparing your financial plan don’t forget to factor inflation.

But there are one different opinion also exist that we may actually need 135% to 140% of our pre retirement expenses. Instead of asking expert first ask to yourself “How much do you need for retirement,” or “How do you want to live in retirement?” and “What activities do you want to engage in?” There are significant difference between need and desire. If your keep your need less than 70-80% of pre retirement expense figure is right but if you want to enjoy retirement to the fullest in style without  thinking of any financial constraint then you need more money for expenses than pre retirement expenses.

There are no fix formula of your needs, only estimate what your wants are. So how much you plan to save should be a factor of what kind of lifestyle you would like to live post retirement. It is not necessary that you would be requiring only 135% or 70% of pre requirement expenses. The whole idea of retirement planning to plan to create a corpus that would make you live a life that you want to.

For example if your wish is long world tour or any other activities to fill free time during retirement then you need bigger retirement corpus. To accomplish these wishes you would need a plan. Make out list of activities you would like to take up post retirement, check current cost and factor in inflation to find out how much it would be cost you after your retirement. Try to establish a fine balance between need and desire and do realistic assessment.

Now a days many retirement calculator available online. You can use it at free of cost. It is essential that estimate conservative projection of your returns for retirement corpus. If you don’t adopt conservative projection then you may not achieve your target corpus.

A safe and in smart way is that begin saving from today as much as you can, as soon as you can for your older days. Start early & save as much as you can is the MOOL MANTRA for retirement planning.

(Friends, please send your feedback and if you have any query related investment or financial product and want more clarity feel free to ask……I would appreciate your valuable feedback and any question.)

Regards,

Arvind Trivedi

Certified Financial Planner