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Retirement Plan

Retirement planning is the important task of deciding how one will live once he/she retires. Retirement planning involves the consideration of a number of factors, including at what age you hope to retire, how much money you will need to cover the living expenses coupled with the things you plan to do once you've retired, and where your money will come from.
In short, retirement planning is planning your finances for the period of life after you stop working.

Why Retirement Planning is necessary?

  • Longer retirement years:
    Average life spans are increasing in India and hence, the retirement years are likely to be longer. With the rise in inflation you will need more money to live in comfort.
  • Financial independence post retirement: 
    Earlier, people could depend on their children to take care of them post retirement. However, as a modern individual, would you not like to maintain your financial independence post retirement also?
  • Inflation:
    Inflation is an important factor. Post retirement, you need a regular income to ensure that your expenses can be met.

How to plan for retirement?
Here is a small way to do your Retirement Planning:

  • First of all see what is your current household expenditure.
  • Inflation is one important factor that needs to be taken into account, so grow your current household expenditure at an assumed rate of inflation for the years remaining for retirement.
  • You will get the required inflation adjusted post retirement income.
  • Then you will have to calculate the monthly investment required to meet the desired retirement income required.

When to start for Retirement Planning?

  • "You are never too young to start for retirement planning"..as the famous saying goes.
  • So plan for your retirement as early as possible so that you can create a good amount of corpus for yourself at the time you retire.
  • There are various factors that needs to be taken into account to do retirement planning for oneself like cost, inflation, market volatility etc as these factors eat up the money saved by you.
  • Let us see an example here:
  • Mr. X started investing Rs 4000 per month at the age of 30 and his friend Mr. Y started slightly late at the age of 40. He invested Rs 6000 per month, when both of them retired at the age 60.
  Mr. X Mr. Y
Age at which began investing (yrs) 30 years 40 years
Monthly investment amount (Rs) 4000 6000
Total Amount invested (Rs) 14,40,000 14,40,000
Corpus at age 60 (Rs) 91,17,301 45,94,181

MrX is a rich man by almost Rs 45,00,000! 

This is the power to start investing early as it makes an exponential difference.