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Saving for retirement takes careful planning and proactive investment strategies. The best time to start saving for retirement is in your thirties. If you start early, you can plan your investments well ahead and retire with a large corpus sufficient to manage all your post-retirement needs. Retirement goals typically vary from one person to another based on one’s personal needs. No matter what your retirement goals are, you need to evaluate your progress carefully to determine whether you are on the right track.
Here is a checklist to determine whether you are progressing in the right direction when it comes to retirement planning:
1. You have determined how much you need for retirement.
This is the most basic step in retirement planning. Without knowing how much you need for retirement, you will not be able to plan your investments in the correct way. The amount of money you invest every year is based on how much money you wish to have following your retirement. Apart from the monthly expenses you need, you must also plan for major life expenses like children’s marriage and education. When you calculate your post-retirement needs, you must take inflation into account. If you are not sure about how to determine the amount, there are many retirement corpus calculators available online to help with your needs.
2. You have already determined your career path.
If you are planning on building a retirement corpus, you must have determined your career path already. While it is not possible to predict the future entirely, you must have some ideas about how much you are going to earn in the future. Your career path is vital when it comes to building the wealth you intend to build. You must also consider your future income growth when determining the amount you wish to invest in your retirement corpus. People who have a clear understanding of their career path can plan their retirement effectively compared to people who don’t.
3. You have a clear idea about different types of retirement plans.
There are different types of retirement plans available in the market. You need to have a clear understanding of these plans to determine which one is suitable for you. There are plans that provide lump-sum payment upon retirement and there are plans that offer regular annuity income following your retirement. You may also choose the type of annuity (for life or for a specific period) you wish to receive from your pension plan. If you have a clear understanding of the best plans suitable for you, you may proceed with your investments and be on track to your retirement planning.
4. You have cleared your liabilities.
Before you start planning for your retirement, you must clear your liabilities. Your outstanding loans will be an additional burden once you start saving for your retirement corpus. Hence, it is necessary to clear your liabilities first before starting with your retirement planning. Make sure that you don’t build too much of credit card debt while starting your retirement corpus. Once you have cleared all your liabilities, you won’t have to face any issues in allocating money for your retirement corpus.
5. Your insurance policies are active for a long period of time.
Life and health insurance policies are an absolute must for every individual. When you plan your retirement corpus, you should not be caught in an unexpected situation that erodes all your life savings. An unexpected medical expense could seriously impact your retirement savings plan. If you wish to avoid this, you need to invest wisely in life and health insurance plans. By investing in term insurance covers, you can take care of your dependents in the case of your unexpected demise. You need to plan for all possibilities well ahead and invest wisely in various insurance plans before saving for retirement.
6. You evaluate your portfolio regularly.
Many people invest in a wide array of investment plans in addition to their retirement planning. Some of these investments may include savings plans, fixed deposits, mutual funds, equity investments, debt funds, real estate, etc. When you invest in retirement plans, you also need to evaluate your portfolio periodically. Any income from these investments can also be effectively used for your retirement. Hence, it is necessary to evaluate your portfolio regularly and proceed with retirement savings accordingly.
Retirement planning is crucial for every individual to make sure that one’s post-retirement needs are satisfied. When you plan for retirement, make sure that the corpus amount is also adequate to explore your passions that you couldn’t satisfy during your working years. If you are not sure about when to start your retirement savings, you could use the above checklist to determine whether or not you have reached the right time in your life.