Retirement Planning is my favorite personal finance topic. Why not? It is the mother of all financial goals. If you have sorted out your retirement goal by investing in a well diversified portfolio of direct mutual funds, then technically speaking you do not have to ‘work’ for the rest of your life. Not that you will not work – there is no way i would suggest you to sit idle at home reading news papers or worse, swatting flies with newspaper rolls.
If you are very young, then you might wonder why is this being discussed now. Isn’t it a bit too early? But hey, hold on! An ‘early retirement’ means that you are free to pursue your passions and goals. That could be traveling the world, starting a music band or whatever.
#Retirement Planning
Here are a few things to keep in mind while planning for that big financial goal of all – your retirement.
- Are you socking away your monthly savings into tax free government instruments like Public Provident Fund? PPF is a great way to build a financial base without worrying about market movements. Are you maxing out your company VPF? While PPF has a limit per year of Rs 1,50,000 you can go above that by expanding your VPF contribution.
- Have you carefully closed out on all your loans, mortgages and debt obligations? Getting into zero liability situation (or having a plan to get there) is a must when planning the longer term goal of retirement.
- Are you diverting previous cash to other goals such as a fancy car or very expensive vacation? Enjoy your life by all means but not at the cost of your major life goal.
- Are you tracking your monthly contribution to the goal and projecting how much it will end up for your deadline?
- As a thumb rule are you gunning for 30 to 35 times your annual expenses for your retirement kitty?
- Are you adequately invested in equity mutual funds? The best way to beat inflation in the long term is to invest in a diversified portfolio.
- Are you adequately invested in debt mutual funds? This may seem like a converse to the above point. But keep in mind that you should have an emergency fund and a few years worth living expenses in debt mutual funds. This will address a worst case scenario of a long downturn in equity markets.
8. Are you investing via Direct Mutual Funds? A long term goal of retirement means that over the 30 or 40 year time frame you could be losing upto 60% of your money via annual commissions of 1% to 1.5% !
9. Have you factored in an adequate corpus for retirement assuming a sufficiently long life span? Need a Retirement planning for that.Average life spans in India are climbing and by the time you grow old they could easily touch 90.
10. Have you planned for an interesting life full of activities, passions and hobbies. This should start NOW and not when you approach 50 or 60. Then there is nothing called retirement. It is just a long happy and eventful life!
Conclusion :
With adequate planning retirement or early retirement should be full of fun and zero financial worry!
Do have retirement planning before it done only. Don’t leave yourself counting on high returns to reach your retirement goals. When it comes to it, it’s best not to focus on short-term ups and downs you can’t control. Two things you can control: How much you save and how much of your return you keep in your pocket.
