Saturday 22 June 2024
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7 best tips for retirement planning in India

7 best tips for retirement planning in India

Retirement marks the beginning of the golden years of your life. While many Indians retire to pursue their life long goals like travelling, the rest of them wish to live a comfortable life in the future. In India, the usual retirement age is between 55-60 years. However, 71% of Indians don’t aspire to retire due to financial constraints, according to a survey.

Retirement planning is imperative to secure your financial future. While it might seem easy, it can end up into a daunting task if not known how to do it effectively. Therefore, let’s take a look below to understand the top seven tips for retirement planning in India:

  1. Start your retirement planning at a young age

When you are young, retirement might be the last thing on your mind. However, it is essential to start your retirement planning when you are in your 20s. After you receive your first paycheck, you have more time in your hand to accumulate funds. As a 25-year-old individual if you invest Rs. 1,00,000 every year for the next 40 years, your invested capital would grow to Rs. 3.5 crores by the time you retire.

  1. Clear your outstanding loans/ debts

The retirement period is usually your freedom from all your hard work during your active working years. When you retire, you should be able to live peacefully without any burden. Therefore, if you have borrowed any liabilities from the creditors, you should pay off all your debts when you are young. If you don’t clear the outstanding debts, the financial burden of paying the past arrears will transfer to your retirement period.

  1. Secure your loved ones financially

During retirement, you might have financial dependants like your spouse or your children with special needs. However, your dependants might financially suffer in your absence. Therefore, you should purchase a term insurance policy for the financial security of your loved ones. Term insurance is a pure protection plan, which offers death benefits to your family when you are around to provide for them.

  1. Invest in a pension plan

During your active working years, you might have saved money to build a secure future. However, savings are not enough since you might utilize it during an emergency. Therefore, you should invest in a pension plan to ensure your financial security without the savings. Retirement pension plans act as an income replacement to meet your routine expenses.

  1. Insure your health

As you grow older, your chances of falling ill are relatively high. Due to multiple sicknesses, you might have to see a doctor more often. In severe conditions, you might even have to get hospitalized. However, you might avoid medical treatments due to the skyrocketing hospital bills. Therefore, make health plans a part of your retirement planning to tackle the hefty treatments with ease.

  1. Consider the inflation rate

There is no denying that inflation would always be a part of your lives. If you manage the effects of inflation, you can end up saving a lot of money. Therefore, select pension plans, which offer high returns. Many insurance companies provide high returns to combat the impacts of inflation on your invested capital. A Unit-linked pension plan offers high returns based on your selection of fund and the performance of markets.

  1. Diversify your investment portfolio

When you are in your 20s, you might shoulder fewer responsibilities of your family members. As a young adult, you can invest in equity funds due to high-risk appetite. Moreover, investing in equity funds means ensuring high returns. However, you should invest in relatively less-risky options like debt fundsas you grow older.

To sum up, the quality of your retirement would usually depend on your accumulated funds. Therefore, you should know how to retire early with maximum funds in your hands. A well-thought retirement planning can ensure all your financial needs are met, even without zero professional income.