Smart professionals often do two things very well:
First, they identify investment opportunities that can get them quick and fruitful results, early in their careers.
Second, they carefully invest in a lucrative and risk-free pension plans to ensure a happy and stress-free post-retirement life.
But that’s just part of the story…
Retirement planning is a complex process and picking the best pension plans from the lot can easily daunt even the most seasoned souls.
I’m sure you’re probably wondering:
“Complication isn’t my thing. How do I easily plan a successful retirement and zero in on the best pension plans available in the market?”
Well today I’m going to make it easy for you.
Brace yourself for I’m going to pull the curtains and reveal 7 stupid simple shortcuts for a simple retirement plan in a record time.
So let’s get started! Shall we?
Sketch a Rough Outline of Your Post-Retirement Life
The first step for planning a successful, healthy and happy post retirement life is to figure out how you wish to lead your post-retirement life.
Are you planning to travel across the globe after retirement? Do you wish to stay at your home and enjoy your post-retirement life with your family and loved ones? Or are you planning to pursue a hobby after retirement?
Here’s the deal:
Determining how you plan to spend your days after retirement will help you get a better understanding of how much your retirement will cost you.
Having a rough outline and iron-clad planning of your post-retirement life will go a long way in ensuring adequate budgeting.
Figure Out When Do You Actually Want to Retirement
Now that you figured out how you plan to spend your post-retirement life, it’s time to determine the time when you will actually retire.
Determining and calculating the number of years you have in hand before you actually retire will help you get a better understanding of the amount you need to save each year for your post-retirement life.
This will also give you a fair understanding how much your existing savings will continue to grow.
You’ll not be able to estimate the volume of retirement corpus you need build until you determine when you plan to retire.
Do the Math to Find Out How Much It Will Cost
Now that you have an idea of how you will live your post-retirement life and the age when you’ll retire, it’s time to calculate the savings you’ll need to build your desired retirement corpus.
Start by comparing the best pension plans available in the market to get an idea of the premium you’ll need to pay until you actually retire.
And don’t just stop there:
Take into account your monthly expenses. Include everything right from your expenses on travel and entertainment to your monthly tax liability. Be generous with your estimates and don’t forget to take the inflation rate into account.
You may argue:
Estimates and assumptions will not be accurate. But, they will certainly help you get started with your retirement planning.
Let’s take an example:
Suppose your monthly household expenses are 300,000. You spend almost 80,000 for entertainment and travel each year. Your health care expenses are 60,000 and you end up paying 60,000 in taxes each year.
So you’ll need at least 500,000 every year after your retirement to meet your monthly expenses.
Now, let’s say you’re 40 years old and you plan to retire at an age of 60. This means you have 20 years to retire. Now, add an assumed annual inflation rate to your average monthly expenses. Let’s take the annual inflation rate as 6%.
Your average monthly expenses in next 20 years will be around 1Cr. This means you’ll need to build a retirement corpus of 1 cr.
Start Saving For Your Post-Retirement Life
I’m sure you’ve heard this…
…but let me reiterate.
“A penny saved is a penny earned.”
Now that you know how much your retirement will cost you, it’s time to start saving and building a retirement corpus.
Take the shortfall estimate from shortcut number 4 and subtract your current savings and pension plan balances to determine your current savings shortfall.
Divide current savings shortfall by the number of years until your expected retirement. Retirement savings shortfall can be made up by saving more or figuring out how to live happily on less– they’re mathematically equivalent.
Be Smart to Keep Growing Your Savings
Well, next step is to mull over investment ideas to grow your savings manifolds.
If only it was that easy…
If you’re serious about ensuring a healthy, happy and financially sound post-retirement life, you’ll need to carefully look for investment avenues to keep growing your savings.
Investing in ULIPs could be your best bet. ULIPs are less prone to market risks and offer comparatively higher returns on investment quickly. Don’t forget to carefully analyse the NAV (Net Asset Value) of the ULIP you intend to invest your savings in.
Yet another reasonable type of investment instruments to look for are ELSS Funds (Equity Linked Saving Schemes). ELSS allows you to earn sizeable profits through investment in equities, while providing you tax benefits at the same time.
These are just two reasonable and easily available investment options to consider if you plan to grow your savings manifolds without having to run from pillar to post and burn the midnight oil.
And that’s not all:
Keep increasing your investments as your income grows.
Keep in Mind Diversification of Investments is The Key to Success
Okay, now you know that ULIPs and ELSS could be your best bet; but don’t just stick to these options like superglue.
Instead, try diversifying your investment portfolio.
Let me explain:
ULIPs and ELSScan help you attain a financially secure post-retirement life, but so can PPF, gold assets and bonds.
Don’t hold on to the thought that investing your savings in ULIPs and ELSS will solve all your problems. Instead, hedge your bets by diversifying your investment portfolio.
You’ll need a better and more efficient investment portfolio that includes everything right from ULIPs to gold assets and bonds.
But before you jump the gun:
Be careful to ensure a balanced investment portfolio. Only a balanced investment portfolio can help you realize your post-retirement dreams.
Start As Early As You Can
“Early bird catches worm.”
This is nowhere truer than in the case of retirement planning.
This is because the earlier you start saving for your retirement, the more time you’ll get to build a decent retirement corpus.
You get to harness the immense power of compounding when you start saving early.
“How early should I start?”
Start right from the time, you get your first pay cheque. Simply set aside at least a 10% of the amount for your retirement. And as your income increases, increase the percentage of your retirement fund savings.
Now it’s Your Turn!
So there you have it – 7 stupid simple shortcuts for planning your retirement in record time. Now go ahead, put this learning into practice and ensure a happy, healthy and stress-free post-retirement life.
Best of luck!