When you earn your first pay check, you have multiple things on your mind. While many people might purchase expensive items from their wish list, the rest of them might buy gifts for their loved ones. As a young adult, you might never think about early retirement planning after receiving your first salary. According to a report, only 33% of Indians save regularly for their retirement.
Retirement planning is an inevitable part of your life. It will not only help you to live a stress-free life but also accomplish your post-retirement goals. While savings are essential, purchasing a pension plan is an excellent choice. Let’s take a look at these few reasons mentioned below, which show why you should have a pension plan:
- Your savings might not be enough to combat the effects of inflation.
- You might utilize your savings during medical emergencies.
- A pension plan acts an income replacement after retirement.
- A pension plan allows you to accomplish your life post-retirement goals like traveling, pursuing interesting hobbies, and so on.
Planning your retirement might seem easy. However, if you don’t know how to begin, you can end up making wrong decisions. Before planning your retirement, you should evaluate your financial needs, consider your post-retirement goals, and identify your retirement corpus. In case you are unable to do so, use a retirement calculator.
A retirement calculator is an online tool for calculating your estimated corpus. Given below are the four steps to calculate your corpus on a retirement calculator:
- Enter your current age, assumed age of retirement, and your life expectancy rate.
- Submit your current expenses like household, travel, and so on. In case you have any past debts or EMIs, add it.
- Add your existing savings and investments along with your monthly contribution towards retirement. You should also enter the expected rate of return.
- After you have filled in all the relevant details, the calculator will reveal whether your current savings will be enough for retirement or not.
While proper retirement planning allows you to live a financially secure future, improper planning can create a financial commotion. When it comes to retirement, one wrong move can disrupt your financial well-being during the golden years of your life. Before planning for retirement, let’s take a look at these tips mentioned below:
- Invest early
When you start early, you can build a large corpus to achieve your financial goals in the future due to more time in hand for reaching the retirement period.
- Use switching features
Pension plans are flexible. As a policyholder, you can switch between equity funds and debt funds during market fluctuation. For instance, you can switch to debts funds when the market is down. When the market bounces back, you should invest in equity funds.
- Look after your health
As you grow older, your medical problems might increase. You might suffer from severe diseases like cancer, stroke, heart attacks, and so forth. Therefore, don’t ignore your health as and when you turn old. While a retirement plan might back you up financially, you should avail a health plan for managing your medical expenses completely.
In a nutshell, the usual retirement age in India is between 55-60 years of age. However, many people aspire to retire early today, especially millennials. For that, you need proper planning and adequate funds to ensure financial security in the long run. Therefore, buying a pension will help you and your family to sustain in the long run financially.
