Factors to Consider for Effective Retirement Planning
A retirement plan is a crucial part of financial planning that needs to be planned carefully to ensure financial security during your retirement days. This includes determining your retirement goals, predicting how much money you’ll need, and investing to grow your retirement savings.
The process can begin at any point during your working years, but the sooner, the better.
Let’s take a look at factors that need to be considered while planning for your retirement.
1) Save as much as You can during High-Earning Years
It is said that your large savings happen in the 50s as you have fewer expenses. There is no school or college fee, no premiums or EMIs to pay. You can save 80% of your income as savings and invest it to build a high retirement corpus
2) Identify Your Goals after Retirement and Start Building Interest
What will you do after retiring? some might find these days as a relaxation period, while others may want to travel the world. Identifying these interests will direct you towards the purpose of your life, as without any purpose, your life will become boring. Try new hobbies. Start teaching a course on weekends, even while working. You can also reach out to NGOs and start volunteering for them. By doing this, you can build a network and maintain relationships with others. It will be easy for you to adapt to these changes after your retirement if you start initiating them now.
3) Make a List of the Potential Expenses in Retirement
Make a list of the anticipated demands that may arise on your retirement savings by you and your family members. You may want to use the corpus for your children’s wedding; you may host functions and celebrations or you may want to use it to grant loans to your siblings and friends. Withdraw a small portion when needed. Use the corpus wisely to make it last at least 30 years after retirement. Avoid overspending and unnecessary expenses. You can also invest in the corpus to create more wealth.
4) Living Arrangements
Assess if your current home or city is suitable for you during your retirement days. Start looking for new places where you want to live after you retire. You might find it difficult to adjust to a new city and make new friends. Take your time and analyse all the locations where you want to live. Spend a few days each year at your preferred locations and then make a final decision.
5) Asset Allocation
Gradually shift your portfolio to a conservative asset allocation, with a maximum of 30% in equities, to provide stable growth. Asset allocation involves dividing your assets among different categories of investments, including stocks, bonds and cash equivalents. Make a list of assets and prepare for an asset allocation. Sell the unused assets or sell assets that are not generating much return. Gradually adjust your portfolio over five years to minimise disruptions and optimise returns.
6) Estate Planning
Use your pre-retirement years to establish comprehensive estate planning. Organise your assets, specify the beneficiaries and document them in a will. Finalise the documentation process and other paperwork. Familiarise your spouse and family with the assets owned by them and involve them in the process to foster transparency.
7) Resolve Outstanding Financial Issues
Address any unsolved financial decisions from your working life. This could be selling off unproductive land and property, optimising your stock portfolio or recovering a personal loan. Working on these things at an early stage can make your retirement plan a lot easier.
8) Review Your Insurance Policies
Make sure you have sufficient coverage after retirement. Re-evaluate and review your health insurance. Consider the impact of lifestyle choices on your overall well-being. It takes time to make lifestyle changes; this is why you should start doing it now.
The earlier you begin, the easier the process will become for you. Utilise your free time in planning for your retirement process.
