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'TODAY' is the Right Day to Start Retirement Planning

Many decisions we make have life-changing results – some in the near future and others in the distant.

#Retirement
4:09 min read

Many decisions we make have life-changing results – some in the near future and others in the distant. Yet due consideration is required, be it, investing in the future of your family, buying a home and/or car, and planning for retirement.

Financial planning reflects the personality of an individual. Let’s see how 3 best friends had a different lifestyle after retirement based on the choices they made in the present day.

Attributes

HARISH

SONAM

SAURAV

Profile

Age: 28 | Team Leader at a bank’s data centre | Shining star at work | Single – dates actively Age: 33 | Marketing Manager at a consumer goods company | Married | Mother of a 6-year old Age: 35 | Vice-President Human Resources | Married | Father of a 2- and 4-year old

Lifestyle

Gadget-freak | Rides a fancy bike | Collects premium watches | Fine dining, always | Stays in a rented apartment in an upmarket condominium | Membership in high-end fitness

Owns an envious collection of shoes and bags| Organises family vacations and weekend getaways | Contemporary home and kitchen décor |Frequent user of premium personal grooming services

Owns an apartment | Travels abroad once a year |Occasional weekend getaways | Budgets spending on apparels, accessories and personal care | Drives a premium sedan

Annual Earning

₹8—10 lakhs pa

18—20 lakhs pa

28—30 lakhs pa

Monthly Saving

5—7% of the monthly income

tax

10—12% of the monthly income 22—24% of the monthly income

Investment portfolio

 Life insurance and EPF 

Life insurance,  EPF, SIP MF, FD, Gold,
Life insurance (pension plan and ULIP included), EPF, MF, FD, National Pension Scheme

Life goals

Maintain the present lifestyle | Purchase a premium SUV | Annual international luxury travel once a year

Maintain the present lifestyle | Corpus for child care, especially education | Coverage for highest quality medical care for family

Maintain the present lifestyle | Retirement planning | Adequate medical coverage for the health of self and family | Corpus for child care |

Thoughts about retirement planning

Live life king-size, after all, you only live once. Having worked only 5 years now, too early to consider and /or start retirement planning

Having accomplished other goals, started with retirement planning after working for 10 years now. Better later than never. Slow and steady win a race

The early bird catches the worm – saved 20% from the first pay-check 12 years ago. Allocated 17% of the additional income from subsequent raises

 

Fast forward to the future (2050)

 

Now 51 | Compromised on the lifestyle and life goals to provide for the family (aged parents, home-maker wife, and adolescent children) | Retirement corpus < 50 lakhs Now 56 | Relies on spouse’s retirement corpus | Able to educate the child in premium school | Family medical coverage insufficient | Struggles to upgrade house maintenance | Retirement corpus ~ 2 crore Now 58 | Educated children in premium school and provided for their higher education in graduate school abroad | Adequate coverage for self and spouse and medical care and attention during retirement years | Retirement corpus > 6 crore


Given how life pans out in the future, it is clear that not only planning for retirement but also starting early makes it count. Thus, 'Now' is the time when you should start your retirement planning."While a bank loan can fund an expensive college course or a grand wedding; it cannot be availed to finance a life during retirement." Here’s how we could benefit from retirement planning.

Why 'NOW' is the Time - Benefits of Retirement Planning

1. Benefit from the returns on reinvestment – ‘compounding effect - Ideally, retirement planning should begin as soon as a person starts earning. In this way, you can set aside affordable amounts for a longer period and gain from the compounding benefit. That’s the compounding benefit that validates the premise as to why people should plan for retirement early enough.

2. Plan for unforeseen expenses – In time there could be many reasons and situations that may require you to spend a large amount of money. It could be additional medical bills, treatment costs due to illnesses and other unexpected financial needs of your family. By planning for retirement, the corpus you build also serves as a safety net in times of unpredictable situations.

3. Safeguard property and assets – Without a plan for retirement, people may be compelled to liquidate their assets to support their lifestyle during retirement or sometimes families have to rely on income from the sale of the property to deal with emergencies. By building a retirement fund, you can safeguard your property and assets and pass your legacy forward to your children and grandchildren.

4. Deal with transitions smoothly – There are many changes in life that may need immediate execution within constricted timeframes. It could be a career change, a change in job location or relocating cities. If you already have a plan for retirement, it would be easier for you to accommodate other changes that may happen in life.

5. During the working years, you might have to relocate for a new job or spouse or take a sabbatical for higher education, to raise your baby, or nurse an ailing parent. In either case, retirement planning ensures that the transition is seamless and doesn’t haunt your golden years.

6. Choose a retirement plan that works for you – Here, people like Sonam, may ask, “What do we get by investing in retirement plans? Why not live one day at a time?"

And a friend like Saurav would wisely reply, “Who will secure your financial future once you stop working? How else can you ensure a steady stream of income? Here's why investing in retirement plans work because.."

1. Firstly, it secures your future financially and protects your family in the cases of your absence.

2. Secondly, it provides various benefits including tax benefits as per prevailing tax laws.

3. Thirdly, it provides a substantial amount at the time of maturity.

4. Fourthly, you can choose from different retirement plans and customize your portfolio based on your investment appetite. Based on your requirement, there are different types of retirement plans you could choose from:

Lifetime cover and income plan

· Is a unit-linked pension plan that guarantees lifetime income for you and your partner.

· It provides options to get guaranteed vesting benefits, death benefits and loyalty benefits that would help you support your family’s financial future post-retirement.

Guaranteed lifetime income plan

· Is a non-linked, non-participating immediate annuity plan that ensures guaranteed lifetime income for your needs.

· It provides the option to receive life-long payments for as long as you or your partner is alive and it provides the return of the purchase price on death of the annuitant(s) (wherein the purchase price of the policy is returned to the nominee).

Life insurance coverage plan

· Is a non-linked participating savings insurance plan.

· It provides guaranteed money back for 15 years from age 61 years to 75 years and maturity benefits at the age of 75 years.


While you can take a cue from the knowledge and experience of others, your plans for the future need to be in line with what and how you perceive and expect it to be. Quoting a friend who succinctly put it, "Financial planning is more than a process, it is a mindset!"

The earlier you plan your retirement, the more you would be able to save and enjoy your post-retirement days. Plan for your retirement now!

ARN:-Jan/Bg/105

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