Long before retirement, an individual needs to carefully map out his or her plans for ensuring a secure retirement. The growing financial pressure on retirement system worldwide is forcing individuals to change the way he think about and plan for retirement. It is need of the time for an individual to plan at an early stage to invest in various investment products in order to create an adequate size of retirement corpus.
“Retirement is not an age; it’s a monetary amount you have thought about for the rest of your life.”
Retirement plan is an arrangement to provide you an income or pension during the cessation of service when you are no longer earning a steady income from business or from employment. All the activities in post-retirement period need money and without money one cannot survive in the society. Like financial planning, retirement planning has become an integral part of human life today. The needs of every individual are different and therefore one formula cannot be applied to everyone while planning. Therefore, it is important to determine various objectives like regular income, corpus building etc. You should determine your risk appetite while zeroing in on the investment instruments.
“Thinking about what you want to do when you are no longer working; Life after 60 years is a process of retirement planning. Thinking about how to manage your expenses after retirement and manage your time without work is also called retirement planning.”
It is a process to think today about your future life and also for your beloved ones. To achieve your retirement goals, you need the right amount of corpus to take care of your needs & key commitments and provide regular retirement income to maintain your lifestyle post retirement life.
Accumulation stage is that stage when you create corpus over the period generally up to retirement and thereafter distribution stage starts, where you spend your created money up to life long.
“A small amount of investment fulfills your dreams; one must think about it.”
These are some of the investment instruments that can form part of retirement plan during the accumulation stage:
• Pension plan,
• National pension Plan(NPS),
• Employee Provident Fund(EPF),
• Voluntary Provident Fund(VPF)
• Public provident fund (PPF),
• Gold, e-gold & Gold Bond,
• land & building,
• Debt instruments,
• NCD and bonds,
• Equity and
• Mutual funds
These are some of the investment instruments that can form part of a retirement plan during the distribution stage:
• Bank deposits
• Company fix deposits
• Senior Citizen Savings Scheme (SCSS)
• Pension Yojana
• Annuity of Life Insurance Company
• Post office MIS.
You can arrange to use the corpus in the distribution stage through interest, dividends, annuity and withdrawing capital, which you have accumulated during the period of working in your life.
Identify various key commitments, responsibility and goals to estimate the corpus required for your retirement goal. The earlier you distinguish between your income and investment; more attractive is the corpus that you can generate for your retirement. At the age 30, if your monthly expenses are Rs. 30000/-and assuming the inflation rate be 4% per annum, you require Rs.97302/- per month at the age of 60. Start investing in equity mutual fund at the age of 30, a very small amount say Rs.4000/- per month(SIP) for your retirement after 30 years you will accumulate Rs.1.50 cores with an annual return of 12.30%, which is sufficient to generate Rs.97300/- per month (assume 7.75% interest in bank FDR) , for your post retirement living expenses easily.
Properly filed documents and ensure nomination registration:
The first and foremost duty of a retiree is to collect all the personal documents and filled in properly and make sure that your spouse and at least one other member of your family is aware of that. In fact, it should be done during the pre-retirement stage. Ensure that the original will, insurance policies and locker documents are known to your spouse and one of the family members to whom you prefer.
Check all the investment accounts along with bank account whether nomination is available or not?
Pro Tip: It is advisable to do all investments in the joint names of self and spouse, with nomination facility.
Forget what you have done during your working period. Fill yourself with positive thoughts and share positive thinking with your friends and family members. Don’t criticize your friends and relations and tend to not get hurt if someone says something against you. It is time to spend your life with your loved ones and enjoy your life full of passion and cut out all the negativity from your life. It may have happened that you have forgot many items in your cupboards, which is not useful or is no more relevant; start distributing your unnecessary things to others, which you had stored in so many years.
Restart your hobbies:
What can you do after retirement? Restart enjoying your hobbies, which were left behind due to work pressure. Start living a life you always wanted to. Get back into shape; make yoga and brisk walking a part of your daily life.
Physical exercises like cycling, walking, and yoga can make you fit and reduce your medical expenses. Exercises maintain your hormonal balance and boost your immunity, which will keep you healthy and happy.
Now, you have ample of time, find out some free time only for yourself. Think about yourself and for the nation, if possible. Try not to commit to many persons as a result you become busy like before. Be social and maintain a friendly attitude with people, you will find many things what you have missed during your working period. You will start to see your relationship with your family and your friends in a new way, which you couldn’t expect in your superannuation period.
R K Mohapatra is Joint GM – Finance, IRCON, and an eminent author of two bestselling books “Investment…Risk & Growth & Retirement Planning”. Contact author- firstname.lastname@example.org.