Retirement planning: Are you prepared financially for life after work?

Many Indians do not have a proper financial plan for their retirement. Where do you stand?

Have you financially secured your retired life?

Retirement is a reality wherein you bid adieu to active employment and your income reduces. However, even though you retire, you need funds to meet your lifestyle and medical expenses. That is why it is imperative to plan for a retirement corpus during your active working life. But how many of us do so?

What the research says

According to the PGIM Retirement Readiness Survey 2020, 48% of the 3000 respondents had no clue about the funds needed after retirement. And 69% of the respondents did not even have a retirement plan in place.

According to the PGIM survey, people’s saving habits have changed. Between 2017 and 2019, most respondents saved for short-term financial goals, enjoying life and improving their standard of living. Retirement planning took a backseat. Moreover, peop

Related: How To Re-evaluate Your Post-pandemic Retirement Planning?

Retirement planning myths

Why do you think people don’t plan for their retirement?

Many individuals believe that their provident fund contributions and gratuity would be adequate to meet their retirement expenses. This is where they are wrong. Though PF and gratuity can help, they won’t be enough. They might contribute only 25%-30% of your retirement needs. For the remainder, you need to establish an independent and optimal retirement fund.

What should you do?

Retirement planning is crucial, and you need to start early to create a suitable corpus for retirement. Here’s how you can build your retirement corpus:

  • Know your retirement age and estimate your life expectancy. For example, if you retire at 65 and expect to live up to 85, you need a corpus that would last 20 years.
  • Assess your average monthly expenses. Don't forget to factor in inflation while calculating the expected expenses needed when you retire.
  • Ascertain the amount of money needed to lead a comfy retired life.
  • Save and know how to invest to create a suitable corpus.

Related: Five Retirement Planning Blunders To Avoid

Let’s consider a quick example:

  • Current age - 35 years
  • Retirement - 65 years
  • The life expectancy - 85 years
  • Corpus needed for - 20 years
  • Average current monthly expenses - Rs 25,000
  • Expected inflation rate - 6%
  • Average monthly expense after retirement - Rs 143,587 (Rs 1.45 lakh)
  • Retirement corpus needed - Rs 1.45 lakh x 12 x 20 = Rs 3.48 crore
  • Average expected return from an investment avenue - 12%
  • Monthly savings required for creating the retirement corpus - Rs 10,000 p.m.

Last words

Try and save a little more to create a bigger corpus. This would ensure that an emergency can be met without draining the fund. Start young so that you can save more money and build a considerable corpus. Choose the best retirement plans, such as equity mutual funds, to earn attractive returns on your savings and create a sizeable corpus.  

 

Retirement is a reality wherein you bid adieu to active employment and your income reduces. However, even though you retire, you need funds to meet your lifestyle and medical expenses. That is why it is imperative to plan for a retirement corpus during your active working life. But how many of us do so?

What the research says

According to the PGIM Retirement Readiness Survey 2020, 48% of the 3000 respondents had no clue about the funds needed after retirement. And 69% of the respondents did not even have a retirement plan in place.

According to the PGIM survey, people’s saving habits have changed. Between 2017 and 2019, most respondents saved for short-term financial goals, enjoying life and improving their standard of living. Retirement planning took a backseat. Moreover, peop

Related: How To Re-evaluate Your Post-pandemic Retirement Planning?

Retirement planning myths

Why do you think people don’t plan for their retirement?

Many individuals believe that their provident fund contributions and gratuity would be adequate to meet their retirement expenses. This is where they are wrong. Though PF and gratuity can help, they won’t be enough. They might contribute only 25%-30% of your retirement needs. For the remainder, you need to establish an independent and optimal retirement fund.

What should you do?

Retirement planning is crucial, and you need to start early to create a suitable corpus for retirement. Here’s how you can build your retirement corpus:

  • Know your retirement age and estimate your life expectancy. For example, if you retire at 65 and expect to live up to 85, you need a corpus that would last 20 years.
  • Assess your average monthly expenses. Don't forget to factor in inflation while calculating the expected expenses needed when you retire.
  • Ascertain the amount of money needed to lead a comfy retired life.
  • Save and know how to invest to create a suitable corpus.

Related: Five Retirement Planning Blunders To Avoid

Let’s consider a quick example:

  • Current age - 35 years
  • Retirement - 65 years
  • The life expectancy - 85 years
  • Corpus needed for - 20 years
  • Average current monthly expenses - Rs 25,000
  • Expected inflation rate - 6%
  • Average monthly expense after retirement - Rs 143,587 (Rs 1.45 lakh)
  • Retirement corpus needed - Rs 1.45 lakh x 12 x 20 = Rs 3.48 crore
  • Average expected return from an investment avenue - 12%
  • Monthly savings required for creating the retirement corpus - Rs 10,000 p.m.

Last words

Try and save a little more to create a bigger corpus. This would ensure that an emergency can be met without draining the fund. Start young so that you can save more money and build a considerable corpus. Choose the best retirement plans, such as equity mutual funds, to earn attractive returns on your savings and create a sizeable corpus.  

 

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