Retirement planning is an important event in everyone’s life. The aim is to lead a comfortable retired life for which you need to plan, have a financial perspective and persistence. Managing to live comfortably after your retirement is hard work that lasts a lifetime.
You need to be committed towards an investment plan and have savings. Governments have reduced their contributions towards social Security due to the increasing number of retired individuals. The retirement planning has, thus, been passed onto the individuals. How much money you will require every month will depend on the standard of living you wish to maintain, your expenses and the retirement age.
You have to decide at what age you will retire, what will be your retirement income throughout the retirement years. To this, you need to calculate the market value of your savings and investments and the return you will get on these. Check the value of the company pension plan, social security benefits, inflation, etc.
Income after retirement can come from employment, employer pension plan, social security, savings, investments, inheritance, lottery wins, prizes, bonus, gifts, and real estate. Many investment plans are available for retirement planning.Start early to save successfully. Also, use the tax-deferred investment to maximize your savings.
Allocating assets will help build your portfolio, and diversification will reduce the risk of your portfolio. Save by making auto debits into your retirement plan, reduce your debts, and make a house budget to reduce extra expenses. Retirement planning involves planning for the following:
Medical expenses
Old age brings out unprecedented medical expenses which may turn out to be a burden. To oversee this problem, it is best to go in for medical insurance and long-term care insurance to finance your health.
Estate planning
Your savings may help towards your child’s or grandchild’s life–financing education, or passing on a portion of the estate to them. Without retirement planning, it may lead to liquidating assets to cover expenses, and this will reduce your legacy to your loved one. Start early it will be very expensive if you want to start late. Put away a small sum every month, and a large amount you become older. Unless you have a lot of loans and debts, start saving early.
Automate
Make automatic payments into your retirement plan from your checking account. Once it is established, you get your paycheck and start saving before you start spending.
Debt
If you have a debt, create a budget plan to pay the debt. Consolidate your debts into one account and pay it. Maintain monthly payments if problems last then get in touch with a financial planner.
If you start late, first create a budget and maximize your savings to catch up skip expenses that can be avoided, which will boost your retirement savings. You may think of a second job if you have a home think of renting it. This can be an income generating asset. Part-time jobs during retirement can change your financial outlook.
Reverse mortgage
You can fund your retirement through your home by going in for a reverse mortgage. It allows you to convert a portion of your home equity into tax-free income. Retirement planning is a lifelong process, and it takes a lot of hard work in accumulating the thousands of dollars in your retirement fund.
Assets
If you have invested in expensive insurance products, give them up and save in higher yielding products. If you have a home in a big city, sell it, buy a home in a smaller city, and put the saved money which you can use for a retired life. Another investment plan is to save in income plans of mutual funds which invest 15% to 20% in equities.
Inflation
Inflations hit these investments hard. It reduces the purchasing power. Things will become expensive and reduce what you can purchase. If you ignore inflation, you will have less than what you had planned out for.
Financial products that can help you in retirement planning
None can match the return received on financial instruments like stock, bonds, and mutual funds. Make a choice for a long term like 10 years or more. You don’t have to stick to the product if it is not performing well. Mutual funds give you a monthly return which you can invest elsewhere. Equity products are tax-free for a year or more.
Exchange traded funds; also called ETFs are a good option for gathering retirement fund. It can be done through Gold Index, buying gold units every month.Investing in bonds for a term of 10-15 years is a good choice.
After retirement, you need regular income which can be through mutual funds or Monthly Income Schemes (MIS). You invest a lump sum, and this corpus provides you monthly income.
A reverse mortgage is a good option for a regular source of income. You pledge your house with a bank and receive income from the bank regularly for a period of time. The amount received will depend on the equity in the house.