Retirement is inevitable. You need to be prepared to face it head-on and manage your finances well to live the retirement life of your dreams. Read on to know a few effective retirement planning tips.
It is said, ‘age is just a number’, but if you are a working professional, you would know that it is an increasing evil, especially as you approach the retirement age. Over the years, you may have to deal with various financial responsibilities like paying rent, EMIs, insurance premium, children’s education, and more. Amidst all the essential expenses, it is vital to make provisions for the future and save for retirement. Here are a few useful tips for retirement planning:
Start investing early and benefit from the power of compounding
Most of the modern-day youngsters don’t even think about retirement planning, let alone start saving for it. However, you must know that the earlier you start investing, the longer time you have to let your money grow and build a corpus. Experts suggest that you must start investing for retirement right from the day you draw your first salary.
Have a term insurance
An insurance cover is a must-have for all. While there are different types of insurance policies available in the market, a term plan has the most affordable premium. It is pure coverage plan that pays a lump sum amount to the appointed nominee in case you pass away before the end of the policy term. The term plan ensures that your family never faces any financial crunch in your absence and allows them to maintain their usual lifestyle. Assess your financial obligations and choose a term plan with sufficient coverage.
Invest in a good health care plan
A medical emergency can occur at any time. It is wise to buy health cover while you are young. This is because the premium is affordable, and if you have any pre-existing medical condition, the waiting period can be covered. As you grow old, you become vulnerable to various critical illnesses, and without sufficient health cover, it would be difficult to pay for treatment cost. Sometimes, depending on the nature of the illness and the treatment, it can deplete all your savings.
Don’t ignore inflation
With the inflation levels rising, the amount you save now may not necessarily be enough to survive about 30 years from now. This means the purchasing power of the savings you have now may not be the same in the future. So, no matter what type of retirement plan you invest, make sure that it yields inflation-adjusted returns.
Pay off the debts as soon as possible
Retirement is a stage where you would want to enjoy life doing things that you enjoy or never got a chance to do all through your working years. It is time for self-devotion and pursue your passion and hobbies. But, to live that life, you must plan your finances well while you are young. You must plan your EMIs, loans and other debts in a way that by the time you attain your retirement age, all your debts are paid off. A debt-free retirement life should be your motto.
Review your portfolio
One of the critical things for efficient retirement planning is a regular review of your investment portfolio. When you are about 5-10 years away from retirement, you must pull out your funds from equity and invest them in debt funds. This will ensure that you avoid any short-term loses due to the volatile nature of the equities. Also, regular monitoring of investments is vital. This would help you know the performance of the funds and adjust the investment accordingly.