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Seven tips to plan your retirement
We're living in a 'right here, right now' world. But, ever wondered what will happen when the flesh turns weak and you no longer can fight the daily battles at the workplace, or even want to.
Few of us think about our sunset years. But think we must and plan for our retirement. So tomorrow, when the days are no longer packed, you have enough in your coffers to live comfortably and do the things you always wanted to but couldn't because of your hectic work life. Here are a few tips to help you with your retirement planning:
1. Be an early bird
The earlier you develop the habit of saving, the bigger your retirement pile will be, not just because you will stash more money in more years but also because of the compounded returns you will earn on it. When you're younger, you can also take some risks with your savings. Some of these risks could pay handsome dividends.
However, if you haven't been an early bird, don't think you have missed the bus and not bother at all. Beginning saving at a later age is better than not saving at all.
The author is co-founder and director of Bangalore-based Perfios Software Solutions Private Limited. www.perfios.com is a personal finance software solution that provides a 360-degree view of your personal finance, with very little manual intervention.
2. Plan properly
Do you want to travel more once you stop working? Is an expensive hobby on your checklist for your later years?
Do account for all these and also adjust them for inflation. What costs peanuts now may cost a small fortune going forward if inflation is high.
A big expense in old age is medical bills. And insurers, too, are unwilling to give health insurance to people over a certain age bracket. So do provision for these expenses in your retirement planning.3. Be a smart investor
Even when you are doing your tax-planning, see that you choose your instruments right. While returns on some instruments are not taxed upon maturity, some are. Adjust for that when you check how much your returns on a particular investment are.
Also mix and match your portfolio well. When younger, go for riskier assets that give higher returns, depending, of course, on your risk appetite. Getting a bit risk-averse as you grow older is acceptable but don't let safety be the only aspect you look at.
Build a portfolio that is a healthy mix of the risky and the not-so-risky. Also remember to keep a diversified portfolio that has allocation for different assets equities, bonds, gold, real estate, mutual funds and the likes.
If you are not sure of how to do this, get professional help. When choosing retirement schemes offered by financial companies, make sure you check the company's credentials. How financially sound you are in your old age depends entirely on how smartly you invested.4. Keep tabs on provident fund
Most companies give you employee provident fund and pension. Every month, a small amount is cut from your salary towards this and the company also contributes to it.
When changing jobs, do remember to transfer your pile to your latest employer and keep tabs on the amount due to you. Also keep the paperwork organised and know how to claim these amounts when you retire. Many of us don't really bother about these small deductions from our salaries.
But if you consider the number of years you have worked and the interest accrued on these amounts, it makes a neat sum. Don't lose out on what you are entitled to only because of some miscommunication or just plain carelessness on your part.5. Be a long-term investor
Rome wasn't built in a day. Nor will your retirement fund be. Even riskier assets like equities are relatively safe if you are a long-term investor. Pick them carefully and spread them over sectors instead of betting all your savings on just a couple of them.
If you are investing for long term, do consider putting more in blue-chip stocks, which are, usually, less risky than mid- and small-cap shares.
The equities market does have its ups and downs. So keep track of the developments over the years. The rule of thumb is to 'buy' when markets are down and to 'sell' when they are up.
Unfortunately, most people do the opposite. Being a long-term investor gives you the option of staying invested in times of downturn. Also remember to reinvest the returns you get on schemes that have matured even before you have retired. Avoid leaving money lying around in bank accounts. The returns are paltry and there are better ways to utilise that money.6. Decide on a part-time job
Even after you retire, it is never a good idea to just stay idle. Working for a couple of hours a day during retirement will not only give you some income but also keep you busy and your mind active.
Before your retirement decide on what you would like to do and work towards that. Expand your business network also accordingly. Remember how you decided what you wanted to be when you grow up? Apply the same rule here.7. Be open to change
The older we get, the harder it is for us to accept change well. However, change needn't always be a bad thing. If you want more bangs for your retirement buck, do consider moving to cheaper localities that may give you a similar lifestyle without putting a strain on your financial resources.
When we're working, there are a number of factors that determine where we live. Proximity to the workplace, easier connectivity and commute and social buzz are the things we usually seek and pay good price for.
After retirement, they may no longer be factors that should drive your choice of habitation. Do some research before your retire so you have time to accept the change and adjust to it.
Take a rain check from your busy career life to think about what lies ahead and what you want. With more and more families becoming nuclear, the days of depending on your children for support in old age are more or less over.
Plan your retirement right and you may well be able to say -- life begins whenever you want it to!