Retirement Planning

The best years of ‘Life' ought to be your retirement years. You have worked hard all your life, and you deserve the best things in life in these golden years.

Retirement planning helps you set-aside money in your prime years when are generating income and enjoy a healthy lump sum or a steady income in your retirement years. It helps you avoid a dramatic hit to your lifestyle post retirement and provides financial protection to your dependents.

Your retirement plan should takes into account the following –

There are several retirement policies, under which you can choose the age at which you wish to retire, and the premium you invest towards your retirement. These policies help you achieve your retirement goal by providing you with significant tax benefits and appreciated capital at your chosen age of retirement.

All of us are living longer than our forefathers. It's absolutely essential to have enough money for old age. Due to increase in the cost of health care and longevity - you need more money for long term than in short term. When you are young you will have lesser income and lesser savings. When you reach middle age, you will have higher income and higher savings. As you grow older, you will have perhaps no income and only your savings saved throughout your earning period will come to your rescue.

Life insurance like pensions and provident fund locks up your savings like in a bank vault and prevents you from withdrawing for your short term consumption needs. A retirement plan helps you set aside money in your prime years when you are generating income and enjoy a healthy lump sum or a steady income in your retirement years.

There is no right age to start savings for your retirement. The earlier and more consistent you are, the better will be your saving in the long run. There is always a substantial difference in the wealth of people who start saving early through a systematic financial plan as compared to those who delay.

Let's look at an example:

Both Ajay and Vijay want to retire at the age of 60 years.

Ajay invests Rs. 50,000 towards his retirement corpus while Vijay invests a total of Rs. 1,00,000 . However, inspite of investing less, Ajay accumulates Rs. 1.49 crore, compared to Vijay's accumulation of Rs. 1.01 crore!

Note: The assumption is that both investments appreciate at the rate of 10% p.a.

What Ajay had in his favour was time! He began investing a sum of Rs. 50,000 p.a., at the age of 25 years. Vijay on the other hand, saved Rs. 1,00,00 every year from the age of 35.

Remember, more than the amount saved it is the rhythm of savings that helps you realize your dreams faster.

While income, expense, investments and liabilities form the four pillars of any financial plan, its success actually depends on the ability to manage these well. This is where Life Insurance forms a critical part of any financial plan. Life insurance is a long term product that provides you the benefit of compounding while ensuring that your loved ones are taken care off.

Inflation is the rate at which the general level of prices for goods and services rises. This erodes the purchasing power of your money. This effectively means that with Rs.100 today, you will be able to purchase more goods than with Rs.100 after 10 years.

With inflation rising continuously, how do we ensure that we have sufficient money to fulfill our dreams? The answer is clear – through regular and systematic savings.

An annuity is a series of payments that an insurance company promises to pay you for a fixed period of time – usually throughout your life. You, the person receiving the payments, is called the ‘annuitant'.