Retirement planning

Retirement planning is an important aspect of personal financial planning and is incomplete without it.It is a forward-looking planning. Deciding when to begin retirement life is a big question. Individuals are so much involved in issues like buying a house, changing jobs or starting a family that no time is found to decide on when to start retirement. Irrespective of age and financial picture, planning for retirement should not be ignored. The power of compounding becomes beneficial when early retirement planning is made. 

The first step in retirement planning is to set Retirement goals,It depends change on the situation and conditions of Everyone Life .The next step is to know how much to invest to achieve the retirement goals.The final step is to formulate investment program.

Retirement planning is closely related to investment and tax planning. Investment and investment planning are the two core vehicles, which are used in building up investment for retirement. 

The three big mistakes with respect to retirement planning are – 

Planning for retirement is started too late; 

very little portion of Investment is kept for after-retirement purpose, and

Investment is made too conservatively.

Many people find it hard to put money for retirement in their late 20s and 30s. They often think of their retirement investment only after their 30s or 40s. It is often observed that the more time they take to investment for retirement the less return they are going to have. Sometimes, because of family needs or other financial concerns people start investing too little for their retirement. Last but not the least it is also seen that the people become too conservative and fail to achieve full potential of their retirement programs.

The size of one’s retirement investment depends on when the investment program has started and at what rate of return. For realizing the retirement, it is always essential for a person to consider the age at which he/she retires and their financial position at retirement. The financial position depends on the plans, more importantly on the career and lifestyle. It is very important for every person to plan carefully. It is therefore always essential to make sure not to satisfy low and short run desires at the cost of high and long-run objectives. 

Retirement goals

Retirement goals should be set in a realistic manner. They should be reviewed annually by a knowledgeable and experienced retirement professional. The sooner an individual starts planning for retirement the better it is. Without planning, it is not possible to meet both financial and non-financial goals. Planning allows assessing situations and identifying potential problems. Advanced planning allows improving the situation and helps in dealing the potential problems in an improved manner. Therefore, savings earlier rather than late will help in accumulating the funds for retirement. 

An example: 

Monthly Savings to Accumulate Rs.1,00,000 

Number of Years before                             Monthly Savings required to           Retirement People  Start Saving             Accumulate Rs.1,00,000

                                                                                   (8%interest ) Rs.

                                                                                                                         

         10                                                                                         550 

         20                                                                                         170 

         30                                                                                           70 

         40                                                                                           30 

Monthly savings to accumulation is important for everyone to their retirement. Government also made efforts for people & Came out with a New Pension Plan (NPS).People should aware the availability of alternative options available for retirement &make use of it. To maintain the standard of living, Everyone should Plan or their Retirement.

Conducting a Financial Review in Retirement Planning: Review of assets like 

housing or land: if it is owned, probably the single and the biggest asset, or else, if there is large equity then it can be converted into an annuity mortgage or sold and the proceeds invested for regular income. If there is any asset in the form of life insurance, then the cash value of life insurance can be converted into annuity. Other form of assets like stocks and bonds should also be reviewed. 

Estimation of Retirement Expenses: Spending patterns may fluctuate.There may be expenses which may be reduced or increased. Expenses like formal clothes may be reduced and more casual outfits may be preferred. Housing expenses may be paid off but insurance and house tax may go up. Miscellaneous expenses like gifts, medical expenses, health and life insurance, expenses for leisure activities etc., may go up. 

Planning for Retirement Housing: Deciding where to live and considering the cost and standard of living and other expenses. 

There are certain tips to be followed in retirement planning: 

a. One should recognize the importance and the need for retirement planning; 

b. Current assets and liabilities need to be analyzed; 

c. An estimation of retirement spending needs should be made; 

d. Retirement housing needs to be identified; 

e. Retirement income should be determined; and 

f. Based on the retirement income, one should prepare a balanced budget

.