All of us, with the exception of none, will one day reach this stage which we call, retirement. This is the time of reminiscing the good old days, the time to relax and enjoy the remaining years that we will stay here on earth together with our loved ones. It should be the best times of our lives, the harvesting season of our journey with life. Retirement of course need not be only about the usual gardening and reading and growing old. If planned well, it can be the most wonderful stage of your life, without children that need to be taken care of and loans that needs to be paid.
Here are some valuable pointers on how to plan your retirement:
To plan your retirement, you need:
- Time: Start early. Use the power of compounding. This can make even your small amount of money add up to a substantial one. Start putting and turning a small amount of your investments into a valuable and suitable pension option.
- Commitment: This needs total discipline. No matter what your expenses are, there should be a constant outflow towards all your goals until you retire. This is often easy said than done because your immediate needs may always seem stronger than a future requirement.
- Adjustment: Prices will definitely rise by the time you are about to retire and continue rising after your retirement. Account for possible inflation because it truly will affect you as long as live. Your standards of living might change for sure. In fact, it would have to constitute a major increase in your expenses patterns rather than inflation, over the last few years.
- Detailing: When accounting for the most basic things that you will be spending for your retirement, don’t forget to include all the other expenses currently being reimbursed now by your company. Medical or traveling expenses are the basic examples, these may not pinch you right now, but certainly they will at a later stage, since you will definitely bear them yourself post retirement.
- Selecting the right option: At this stage, keep your options open on investing in an annuity distribution cycle and service providers. Once pension options open up in your area, you immediately check a variety of more suitable options available.
Bear in mind the following:
- Lock-in: Your pension plan should definitely not have any flexibility or liquidity options. Avoid withdrawal or liquidity options by all means during the contribution (wealth creation) period. The body you generate must be available for an immediate annuity option from the moment you retire.
- Cost: Unit Linked Insurance Plans, which are popularly called ULIPs, are a good option for the longer term. But when you choose unit-linked plans you must carefully need to look into the overall cost structure, which impairs the entire return in the long-term together with the performance of the fund.
- Tax benefits: You must understand very well the tax benefits of any pension plan. Your accumulated money must be tax free; only annuities at the moment of receipt should be taxed. You will have the flexibility to figure out the annuity cycle when you retire, so that you can eventually work it out at the time of maturity, depending on the present tax rates. Making any approximates about the tax structure about that time would be very hazardous.
- Focus: Try also never to look at any additional benefits. Each of these will cost you more and, thus, reduce your maturity benefits. Any pension plan should only generate maximum retirement investment.
In conclusion, preparing your retirement plan will only be a winning moment, and you will never get any disadvantage with it. Although, much sacrifice will be shouldered at the moment, but peace of mind will always be with you thinking that one day when everything has been said and done, your old age is secured and you won’t be a burden to your family. Indeed, retirement with a plan is equals to “growing old graciously”…Plan now for your retirement, tomorrow might be too late…
