Retirement Planning

 

What is Retirement Planning?

 According to Investopedia , Retirement planning is the process of determining retirement income goals, and the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, sizing up expenses, implementing a savings program, and managing assets and risk.

 One should have a fixed budget for retirement. One should start retirement planning a early as possible and they should also track and review their plan wisely.

                                                                                          

                                                                                      

                                                                                    

How to make an effective Retirement Plan?

Let us understand the same through an example:

 (You can get retirement calculator online)

ANSHUL'S RETIREMENT PLAN
Current Age	25
Monthly expense	179500
Retirement Age	50
No of years for retirement	25
Life expectancy	75
% expenses after retirement	100%
Inflation Rate	7%
Value of  monthly expenses post retirement	Rs. 9,74,224.16
No of years in retirement	25
Return on Corpus	8%
Corpus required to account for retirement expenses	Rs. 25,87,17,770.81

 

MONTHLY EXPENSE SHEET
Particulars	Amount
Groceries	5000
Fruits and vegetables	1500
Clothing	1000
Electricity	1500
Water supply	500
Medical expenses	1000
Medical insurance	2000
Loans and interest	100000
Maintenance expenses	5000
Other insurance	2000
Education expenses	20000
Servant Salaries	40000
Total  monthly expenses	Rs.179500

 

Analysis from the preparation of Retirement Plan

In the above plan, assuming that I will start earning at the age of 25, it can be seen that monthly expense of Rs.179500 will translate into Rs.9.74 lacs at the time of retirement which needs a huge corpus or saving of almost Rs. 25.87 crores given the inflation rate of 7%.It also becomes clear that financial security is much dependent on proper and adequate financial planning. One also comes to know that the value obtainable for money will be far less at a future date.

                                                                       Conclusion 

 One can  even personally in order to maintain a similar lifestyle to their current lifestyle, it is necessary to begin saving for retirement as early as possible. So, when I will start retirement planning, generally 50%, 30%,20% rule is applied where 50% of the income goes to your needs, 30% for wants and 20% for savings.  One can  follow the same rule to make my retirement plan more effective.