Your retirement could be a smooth, scenic highway or a pothole-riddled road. It all depends on how you map out your route and how well you plan in advance. Having a comfortable, relaxed, and financially secure retirement depends on how you manage your expenses, savings, and investments. There are so many aspects to consider and so many opportunities to invest in, which can often make it difficult to know where and how to start. Here are all the important things you should know to start planning for your retirement.
Plan When to Retire and Decide on Your Retirement Goals
The first step in planning for your retirement is to plan when to retire; you don’t have to decide on an exact date or age, but just a reasonable and general time frame or target age. This allows you to decide when and how to start planning for the same. It will help you answer questions like:
- How long do you have to save?
- How long will you have a steady source of income?
- By when should you start receiving returns on your investments?
The key to answering these questions is to take the first step and that is to decide when you plan to retire and what your retirement goals are. Do you wish to retire in the city, or move to the countryside?
Identify Post Retirement Sources of Income and Expenditure
Post-retirement sources of income could include rent from a property you own, social security, provident funds, or return on current investments. In addition to finding sources of income, you need to chart out possible expenses like medical expenses, repayment of long-term loans, living expenses, and so on. This will help you calculate how much of a head start you need to get in terms of financial assets when you decide to retire. Retirement plans are not generic, and you need retirement planning that works for you, which requires a thorough understanding of your current situation. What percentage of your income should you put into savings? What kind of returns do you need on your investments? What type of insurance policies must you purchase? You must address these questions, as they will give you an idea of your current situation, and what you need to address moving forward.
Make the Right Investments
There are numerous types of pension plans, low-risk bonds, stock investments, and mutual funds that you can invest in. But while making these investments, you need to also assess the risks involved. Various investments also offer tax savings and could be beneficial. Investing in property is also important. Your investments need to be made in such a manner that the returns can cater to your expense after considering inflation. You should also have a life insurance policy that secures your loved and dear ones in addition to suitable medical policies.
Planning and saving for your retirement is a lengthy process. Saving a huge portion of your income and compromising on your present needs is not the solution, neither is living today like there is no tomorrow. You need to strike a fine balance. The fact that you are here, reading this article, shows that you have the right frame of mind and are headed in the right direction. If it all seems too daunting, you could always seek professional financial advice. Slow and steady wins the race.