Importance of Retirement Planning
Learn what is retirement planning and why it is important
- Retirement planning is the act of saving money for your retired life.
- It involves setting financial goals and creating a retirement corpus.
- Retirement planning helps you sustain the lifestyle you are used to when your income sources reduce.
- It requires investing in securities that generate inflation-adjusted returns.
- You can employ the services of professional financial planners for assistance with retirement planning.
An adage goes that life is everything between birth and death. The "between portion of life" primarily comprises working hard and earning money to live a life of dignity. The money you make helps support your lifestyle while you have regular income sources. To ensure you can enjoy financial security and the same standard of living while you are old, you should invest and save money regularly. Yes, it is crucial to plan for your retirement right from the start. Let us understand what retirement planning is and why it is important.
What is Retirement Planning?
Retirement Planning can be defined as the act of saving your money through adequate investments during your work life so that you have sufficient funds to support your retired life. It involves setting achievable financial goals and creating a retirement corpus. A good retirement plan helps you generate inflation-adjusted returns and meet your retired life goals.
How to create a Good Retirement Plan?
You can create your retirement plan on your own by methodically investing in various market instruments like shares, mutual funds, government bonds, fixed deposits and diversifying your investments. You can also employ the services of a financial planning expert.
Importance of Retirement Planning
Here are some reasons why financial planning for retirement is essential:
You cannot work forever
You typically have anywhere from 30-40 years of work-life, during which time you can make money. Once you get old, your income sources may be restricted. With limited income sources, you may find it difficult to sustain the lifestyle you were living before retirement. However, you can continue leading the life you are accustomed to with proper retirement planning.
Your expenses increase with old age
As you grow older, your expenses will start to increase. You may need to spend on medicines and other old age-related expenses. The cost of your medical and life insurance policies will also increase. With increasing life expectancy and medical advancements, you cannot predict how long you will live. As such, you must have sufficient savings to lead a long life with dignity.
To fulfil your life goals
Old age can be pretty dull with little to do. However, it is also the time to fulfil your many life goals – from buying that gorgeous bungalow to travelling the world. Proper retirement planning allows you to build the corpus you need to achieve the goals you had to put on the back burner while you worked to provide for your family. It also enables you to secure the financial future of your loved ones.
The importance of retirement planning cannot be understated. Starting early is just as crucial as diversifying your investments. Choose a variety of instruments from fixed-income investments to equities, debt, and income tax saving schemes. This way, you can benefit from the power of compounding and create a decent retirement fund. Spend time with a financial planner to learn the best ways to save for retirement.
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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.