- Date : 01/06/2022
- Read: 7 mins
Retirement planning is a very important step to ensure that you will have a stress-free, fun and joyful retired life. Here's what you need to know about retirement planning.
Retirement planning is a very important step to exercise to ensure that you enjoy a stress-free and secure retired life. Many people think that life after retirement can't be the same as life before retirement, but it is a myth. If you have made proper financial and retirement planning, then you will surely be able to enjoy your dream retired life.
Along with that, you also need to take care of tax planning so that you don't end up paying heavy taxes at the time of retirement, which may be a big hit on your retirement corpus.
Thus, in this article, we will cover 6 key investment tips that will help you ensure that you enjoy a worry-free retired life.
1. Don’t Give in to Knee-jerk Reactions
One of your mistakes can be actively listening to mainstream media financial news programs and social media influencers. These channels mostly focus on the side through which their viewership and TRP can be increased.
Thus by blindly following them, you will surely end up making a bad financial decision that may negatively affect your retirement investments. Instead, take the help of financial advisors who are the experts in this field and use their personalised guidance for planning your retirement.
Along with that, don't follow investment tips and advice from some random people posted on Google as you aren't aware of the authenticity of both person and information; thus, taking an impulsive decision can give you a big hit on your future plans and investments.
Also Read: Retirement Planning Blunders
2. Differentiate Your Money Between Short-term and Long-term
Another common mistake most people make is that they treat all of their savings and investments as the same and do not segregate them. This issue mainly happens because most people think that all of their money is like the money kept in one pot, and they can use and withdraw it from anywhere at any time.
This issue also happens due to some kind of miscommunication between advisors and the people. When an advisor says, “You can withdraw a small percentage of the money from your investments to fulfil your needs,” people understand that they can withdraw it from anywhere as all things are the same.
Thus, it is very important to understand the fact that everything isn't the same, and your different investments hold different values, returns and goals, so you shouldn't treat them the same.
To overcome this issue, you should, right from the start of your retirement planning journey, segregate your investment based on a two-timeframe:
- Short-term investment
- Long-term investment
Also Read: Investment products for retirement
3. Shore Up Your Income Streams
It's difficult to go from a life where you worked every day and received a salary at the end of the month that helped you and your family survive to a life after retirement when you won't receive any more payments from your company. Thus, after retirement, you will need to depend on your savings and investments to work for you as a paycheck.
The solution to this problematic situation is shoring up the income streams. Because shoring up the retirement income streams will help you be more confident to do the things you wanted to do after your retirement. Along with that, it will ensure that you are emotionally free from the financial stress of how you will pay monthly bills or spend on goods you had planned to buy after your retirement.
So you may invest a percentage of your money in something that isn't based on the stock market, such as bonds, money market funds, CDs, FDs, and so on, so that your entire portfolio isn't based on stocks and mutual funds.
Along with that, you can also invest some amount in government pension schemes, post office monthly income schemes, digital gold bonds, etc., to ensure that your portfolio is truly diversified and not too dependent on the equity market. In addition to that, this step will also ensure that you have a safe retirement income to live a stable retirement life.
Also Read: PPF Account(s)
4. Invest in Quality Companies for the Long-term
Some of the major factors that you will need to deal with during your retirement are inflation, emergency expenses, longevity, etc. To overcome these factors, you will require a long-term growth plan, which ensures that you enjoy your retirement life and don't end up worrying about what to do next.
Thus, to solve this problem, investing in large-cap quality companies can be a good option as it will help you generate a good amount of corpus during the time of your retirement. If you see the past track record of the Indian stock market, it can be easily said that if you are investing in good companies for the long term, then there is a surety of some good amount of returns and wealth to be generated.
It is also a well-known saying that "Don't put all your eggs in one basket." Thus, by investing in the equity market, you can also diversify your investment so that it balances out with your other investments if anything goes wrong at one place.
Also Read: Saral Jeevan Bima
5. Focus on Being Tax-efficient
It is very important to ensure that you are taking the required steps to be tax-efficient because if you do not, you may get a big hit at the time of retirement when you will start withdrawing your investments. At that point of time, you will need to pay hefty taxes on the gains from your investment.
Thus, you can segregate your investment into 2 categories:
1) Tax-Free
2) Taxable
It's also a good idea to hire a tax planning professional and employ well-known tactics like tax harvesting to save the most taxes possible and ensure that when it comes time to retire, you don't wind up paying a big amount of your investment in taxes. Hence, a tax plan or planning your taxes is essential for achieving your retirement goals.
Also Read: Portfolio Rebalancing
6. Let Integrated Planning Help You Make Sound Decisions
It is very important that all of your liabilities, investments, taxes, insurance and saving be integrated in one place so that you can easily overview them, manage them and also take required steps whenever necessary.
Another essential advantage of integrating all things in one place is that you will be able to easily spot tax-saving opportunities, which will accumulatively help you save taxes in the long run.
Often, this step is missed by the financial advisor because they are much more interested in selling you various kinds of products rather than making them integrate at one place, so you should know this and take care that this important step isn't missed.
Also watch: How To Create Retirement Plan with Retirement Calculator By CA Rachana Ranade
Summary
You shouldn't react or act upon some news and investment tips you might see on Google, news channels, etc. instead, consult a financial advisor for proper personalised financial and retirement planning. It is essential that you bifurcate your investment as short-term and long-term investments, and don't treat them the same. You should ensure that you have different income streams and shouldn't just depend on one income stream entirely.
It is also essential that your investments are diversified, and you also have exposure to the equity market, from where you can earn a good amount of returns in the long run. You will need to ensure that you are taking advantage of tax harvesting and tax planning efficiently so that you don't end up paying more taxes at the time of retirement. It is very important to integrate all of your investments in one place to monitor them easily and take the required steps to ensure that your investments are going on the right path.
Retirement planning is a very important step to exercise to ensure that you enjoy a stress-free and secure retired life. Many people think that life after retirement can't be the same as life before retirement, but it is a myth. If you have made proper financial and retirement planning, then you will surely be able to enjoy your dream retired life.
Along with that, you also need to take care of tax planning so that you don't end up paying heavy taxes at the time of retirement, which may be a big hit on your retirement corpus.
Thus, in this article, we will cover 6 key investment tips that will help you ensure that you enjoy a worry-free retired life.
1. Don’t Give in to Knee-jerk Reactions
One of your mistakes can be actively listening to mainstream media financial news programs and social media influencers. These channels mostly focus on the side through which their viewership and TRP can be increased.
Thus by blindly following them, you will surely end up making a bad financial decision that may negatively affect your retirement investments. Instead, take the help of financial advisors who are the experts in this field and use their personalised guidance for planning your retirement.
Along with that, don't follow investment tips and advice from some random people posted on Google as you aren't aware of the authenticity of both person and information; thus, taking an impulsive decision can give you a big hit on your future plans and investments.
Also Read: Retirement Planning Blunders
2. Differentiate Your Money Between Short-term and Long-term
Another common mistake most people make is that they treat all of their savings and investments as the same and do not segregate them. This issue mainly happens because most people think that all of their money is like the money kept in one pot, and they can use and withdraw it from anywhere at any time.
This issue also happens due to some kind of miscommunication between advisors and the people. When an advisor says, “You can withdraw a small percentage of the money from your investments to fulfil your needs,” people understand that they can withdraw it from anywhere as all things are the same.
Thus, it is very important to understand the fact that everything isn't the same, and your different investments hold different values, returns and goals, so you shouldn't treat them the same.
To overcome this issue, you should, right from the start of your retirement planning journey, segregate your investment based on a two-timeframe:
- Short-term investment
- Long-term investment
Also Read: Investment products for retirement
3. Shore Up Your Income Streams
It's difficult to go from a life where you worked every day and received a salary at the end of the month that helped you and your family survive to a life after retirement when you won't receive any more payments from your company. Thus, after retirement, you will need to depend on your savings and investments to work for you as a paycheck.
The solution to this problematic situation is shoring up the income streams. Because shoring up the retirement income streams will help you be more confident to do the things you wanted to do after your retirement. Along with that, it will ensure that you are emotionally free from the financial stress of how you will pay monthly bills or spend on goods you had planned to buy after your retirement.
So you may invest a percentage of your money in something that isn't based on the stock market, such as bonds, money market funds, CDs, FDs, and so on, so that your entire portfolio isn't based on stocks and mutual funds.
Along with that, you can also invest some amount in government pension schemes, post office monthly income schemes, digital gold bonds, etc., to ensure that your portfolio is truly diversified and not too dependent on the equity market. In addition to that, this step will also ensure that you have a safe retirement income to live a stable retirement life.
Also Read: PPF Account(s)
4. Invest in Quality Companies for the Long-term
Some of the major factors that you will need to deal with during your retirement are inflation, emergency expenses, longevity, etc. To overcome these factors, you will require a long-term growth plan, which ensures that you enjoy your retirement life and don't end up worrying about what to do next.
Thus, to solve this problem, investing in large-cap quality companies can be a good option as it will help you generate a good amount of corpus during the time of your retirement. If you see the past track record of the Indian stock market, it can be easily said that if you are investing in good companies for the long term, then there is a surety of some good amount of returns and wealth to be generated.
It is also a well-known saying that "Don't put all your eggs in one basket." Thus, by investing in the equity market, you can also diversify your investment so that it balances out with your other investments if anything goes wrong at one place.
Also Read: Saral Jeevan Bima
5. Focus on Being Tax-efficient
It is very important to ensure that you are taking the required steps to be tax-efficient because if you do not, you may get a big hit at the time of retirement when you will start withdrawing your investments. At that point of time, you will need to pay hefty taxes on the gains from your investment.
Thus, you can segregate your investment into 2 categories:
1) Tax-Free
2) Taxable
It's also a good idea to hire a tax planning professional and employ well-known tactics like tax harvesting to save the most taxes possible and ensure that when it comes time to retire, you don't wind up paying a big amount of your investment in taxes. Hence, a tax plan or planning your taxes is essential for achieving your retirement goals.
Also Read: Portfolio Rebalancing
6. Let Integrated Planning Help You Make Sound Decisions
It is very important that all of your liabilities, investments, taxes, insurance and saving be integrated in one place so that you can easily overview them, manage them and also take required steps whenever necessary.
Another essential advantage of integrating all things in one place is that you will be able to easily spot tax-saving opportunities, which will accumulatively help you save taxes in the long run.
Often, this step is missed by the financial advisor because they are much more interested in selling you various kinds of products rather than making them integrate at one place, so you should know this and take care that this important step isn't missed.
Also watch: How To Create Retirement Plan with Retirement Calculator By CA Rachana Ranade
Summary
You shouldn't react or act upon some news and investment tips you might see on Google, news channels, etc. instead, consult a financial advisor for proper personalised financial and retirement planning. It is essential that you bifurcate your investment as short-term and long-term investments, and don't treat them the same. You should ensure that you have different income streams and shouldn't just depend on one income stream entirely.
It is also essential that your investments are diversified, and you also have exposure to the equity market, from where you can earn a good amount of returns in the long run. You will need to ensure that you are taking advantage of tax harvesting and tax planning efficiently so that you don't end up paying more taxes at the time of retirement. It is very important to integrate all of your investments in one place to monitor them easily and take the required steps to ensure that your investments are going on the right path.
