Consider this question; Do you have a system that guides you on how to plan for retirement in India? This question usually haunts every Indian in his 50’s. Research shows that over the past few years most individuals are financially not ready for their years of retirement.
The Oasis research claims that the average balance is just Rs. 24,000 in the provident funds. Shocking, isn’t it? This only highlights the notion that retirement planning is a process that is very important & requires careful planning & execution.
In this article, you will discover the Top 10 tips on how to plan for retirement in India. Below we have listed these tips & we’ve also explained how these tips will help you in your retirement planning.
Start Your Retirement Planning at the Earliest
It’s better if you start to save at an early age. However, it’s never too late to start even if you’re halfway your employment journey. If you save Rs.2000 per month for forty years at a rate of 12%, you will have more amount than an individual who saves at the same rate for 10 years.
Important Point: An important thing to remember is the asset allocation. Remember that asset allocation is very crucial as you get nearer to your retirement years. This is so because your tolerance of volatility (sudden changes) gradually goes down as the quantity of years within which you can recover any loss.
Consider Your Savings as Your Expense
You can credit your salary to a savings account & keep scheduled certain amount for automatic debit. You can credit this amount to a savings account of retirement on the day you get your salary.
Save as Much as you’re able to in a Tax-Deferred Account
A Tax-Deferred account helps you to save enough money for the retirement. In this account, you will be able to save sizeable cash for your retirement. Also, it will prevent you from trivial spends, like those which happen on impulse. Ultimately, you will avoid costs like tax consequences & penalties.
All retirement accounts have some form of penalty on withdrawals like PPF, pension plans, equity funds etc. In such scenario & everyday increase in current consumption ratio, measures like investment in Tax-Deferred Account are a must.
Diversify Your Retirement Portfolio
Asset allocation is the key part to manage your retirement assets. If you channel all your savings in one particular form of investment then there is a chance that you may lose all your investments. This also limits your Return On Investment (ROI) ratio.
Listed below are the factors that will help you to allocate your assets in a proper way.
• Your age factor – Your age factor usually reflects in the assertiveness of your portfolio. It is likely, that you will take greater risks when you are younger & less when you get close to your age of retirement.
• Your volatility tolerance – Your volatility tolerance, helps you to ensure a time phase where you will be able to recover your losses in the most beneficial way. In this way you can manage your loss in en efficient way & generate profits gradually.
• Your objective must be clear- Your objective must be clear, whether you want to grow your assets or produce income.
Consider All of Your Possible Expenses in your Financial Plan
When people plan for retirement, many tend to underestimate their expenses like medical costs, nursing & other expenses like expense to employ a cook, travel expense, etc. When you decide how much you should save for the retirement you must make a list of all these kind of anticipated expenses. These expenses will include everything that you may incur during your retirement years.
Consider your Budget
When you are able to save huge money it is a great achievement. However, if you have to use a credit card to pay your everyday expenses then all your efforts are nullified. Hence, always prepare & work within a budget that is essential for you.
Periodically Reassess Your Retirement Portfolio
Periodically reassessing your portfolio will help you to ensure that your plan for retirement is aligned with your asset allocation process. As you get nearer to your retirement your financial needs, expenses & risk tolerance capacity changes. Therefore, strategic asset allocation must be performed on your portfolio to allow for any necessary adjustments.
Reassess Your Expenses & Make the Needful Changes
If the lifestyle, income & financial responsibilities have altered, then it is a good deed to reassess your financial profile. This will help you to make adjustments wherever possible.
A reassessment of all your income, expenses & financial obligations helps to determine the need to increase or decrease the amount to save on a regular basis. Also revisit your life insurance portfolio regularly.
Consider Your Spouse in the Saving Process
If you are married, include your spouse in the saving processes as well. Also check that which expenses can be shared during your retirement years. This will reduce pressure. If your spouse is not saving then you must determine that your retirement savings plan is enough to cover all the expenses of your spouse as well.
Work with an Experienced Financial Planner
If you are not experienced in the field of financial planning & portfolio management don’t worry. In this case, it is better if you take the help of an experienced & qualified financial planner.
Follow these tips & you will know exactly how to plan for retirement in India with a customized retirement plan for yourself.