{"id":2773,"date":"2021-05-25T18:25:53","date_gmt":"2021-05-25T12:55:53","guid":{"rendered":"https:\/\/blog.tickertape.in\/?p=2773"},"modified":"2022-09-05T18:43:21","modified_gmt":"2022-09-05T13:13:21","slug":"retirement-planning","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/retirement-planning\/","title":{"rendered":"Retirement planning: meaning, importance, and steps"},"content":{"rendered":"\n<p>You work really hard to provide your family with all the luxuries of life and secure their future. But what about your future? Isn\u2019t that important too? You take a life insurance policy to safeguard your family\u2019s future but, what about your life after 60? Many of us tend to procrastinate and then retire with not enough money to make ends meet. This is why <a href=\"https:\/\/www.tickertape.in\/blog\/age-wise-retirement-planning\/\">retirement planning<\/a> is important.<\/p>\n\n\n\n<p><strong>This article covers:<\/strong><\/p>\n\n\n\n<p><a href=\"#Need\">Need for retirement planning<br><\/a><a href=\"#Importance\">Importance of retirement planning<br><\/a><a href=\"#Steps\">Steps in retirement planning<br><\/a><a href=\"#Start\">When to start retirement planning?<\/a><\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/retirement-planning\/#Need-for-retirement-planning\" title=\"Need for retirement planning\">Need for retirement planning<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/retirement-planning\/#Importance-of-retirement-planning\" title=\"Importance of retirement planning\">Importance of retirement planning<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/retirement-planning\/#Steps-in-retirement-planning\" title=\"Steps in retirement planning\">Steps in retirement planning<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/retirement-planning\/#When-to-start-retirement-planning\" title=\"When to start retirement planning?\">When to start retirement planning?<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"Need\"><span class=\"ez-toc-section\" id=\"Need-for-retirement-planning\"><\/span><strong>Need for retirement planning<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Healthcare is expensive these days and will be even more after a few decades, given the current lifestyle and the high chances of more doctor appointments in the future. The bottom line is that you need money in your post-retirement life to pay for necessities. Also, to enjoy both, basic comforts and holidays, the sad part is your EPF or VPF won\u2019t suffice. <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-do-retirement-planning\/\">Retirement planning<\/a> simply ensures financial security after you have stopped working at a certain point in life.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Importance\"><span class=\"ez-toc-section\" id=\"Importance-of-retirement-planning\"><\/span><strong>Importance of retirement planning<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Retirement planning is as important as providing quality education to your children or living a healthy life. Here\u2019s why:<\/p>\n\n\n\n<ul><li><strong>Increasing life expectancy: <\/strong>According to a study by the World Bank, life expectancy in India was ~41 yrs in 1960 which rose to 62.5 in 2000 and is ~69 as of 2018. This is clear evidence that Indians are living a longer life than they used to. Living longer has a cost, and for that, you need money. Now, for that, you need to <a href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/\">invest<\/a> regularly. Plan for it and start your investment journey at the earliest!<\/li><li><strong>Work has an expiry date: <\/strong>You cannot work for your entire life, and many professions do not allow you to work beyond 60-65 yrs of age. You stop working, and the monthly cash inflows stop as well. This is where the savings for your retirement will come in handy. Though there are options of SCSS or <a href=\"https:\/\/www.tickertape.in\/blog\/senior-citizens-savings-scheme-scss-benefits-eligibility-account-opening-interest-rate\/\">Senior Citizen Savings Scheme<\/a>, you cannot solely rely on those since you can\u2019t be putting all your eggs in one <a href=\"https:\/\/www.tickertape.in\/blog\/can-i-buy-multiple-stocks-in-one-trade\/\">basket<\/a>, that too after turning 60<\/li><li><strong>To fulfil your bucket list: <\/strong>Each of us has certain aspirations in life, such as taking a foreign vacation or starting a caf\u00e9 business. We tend to put these things on our bucket list to pursue them once we retire. To make these aspirations a reality, you need money after you quit working, which is why retirement planning becomes important<\/li><li><strong>Medical emergencies: <\/strong>Certain health problems arise as you get old<strong>.<\/strong> Medical bills can eat up all your savings quickly. The worst part is that the healthcare industry\u2019s inflation rate was at around 15% annually, accounting for a substantial hike in prices. Thus, to provide for medical emergencies, you need detailed retirement planning<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Steps\"><span class=\"ez-toc-section\" id=\"Steps-in-retirement-planning\"><\/span><strong>Steps in retirement planning<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If you are wondering how to start planning your retirement, here are some steps you can follow:<\/p>\n\n\n\n<ol><li><strong>Finalise your retirement age: <\/strong>In India, this age falls between 55 and 65, with the median age being 60 yrs. However, for self-employed and business people, the retirement&nbsp;age might differ. This step will help you ascertain the number of yrs you have before you take retirement. Further, based on your estimated life expectancy, you would know the number of yrs you need money for post-retirement<\/li><li><strong>Begin early: <\/strong>Don\u2019t be a procrastinator; start your planning early in your career. This will reduce the burden which you will otherwise face if you start at 40-45 yrs. Compounding (or compound interest), known as <em>The Eighth Wonder of the World, <\/em>will not work for you if you delay your retirement planning<strong> <\/strong>as it works in the long-term only. Make retirement planning one of your financial goals if you want to enjoy <a href=\"https:\/\/www.tickertape.in\/blog\/5-must-dos-to-enjoy-financial-freedom\/\">financial freedom<\/a> after you turn 60<\/li><li><strong>Decide on your retirement corpus: <\/strong>This is one of the most important steps in your retirement planning, wherein you have to determine the amount you need after you quit working. This amount should cover all your expenditure (fixed and variable), which you might incur once you are a senior citizen. To arrive at this number, you will need to compute the future value of your current expenses<\/li><\/ol>\n\n\n\n<p>For example,<strong> <\/strong>take Ramesh\u2019s case, who is 35 yrs old and wants to retire at 60, and his current expenditure amounts to Rs 75,000 every month. Let\u2019s say his annual medical and <a href=\"https:\/\/www.tickertape.in\/blog\/effective-money-saving-travel-hacks\/\">travel<\/a> bills add up to Rs 5 lakh. Now take inflation in the economy as 6-7% and as 10% in medical bills to compute the future value of Ramesh\u2019s current expenses.<\/p>\n\n\n\n<ol><li><strong>Forecast your savings: <\/strong>You also need to compute the future value of your current savings. This amount is what is left after deducting all your annual expenses from your yearly take-home salary. The next step is to compute this amount\u2019s future value using the rate of returns on your investment as a factor<\/li><li><strong>Investment is key: <\/strong>What if the future value of your current savings and the retirement corpus don\u2019t match? This is where the aspect of investment becomes vital. Financial advisors and money managers advise that saving money alone is not important; instead, investing it to generate returns also matters in the long-run<\/li><\/ol>\n\n\n\n<p>Based on your risk appetite, you have a plethora of investment<strong> <\/strong>options available in India, from PPF to <a href=\"https:\/\/www.tickertape.in\/blog\/mutual-funds\/\">mutual funds<\/a> and <a href=\"https:\/\/www.tickertape.in\/blog\/the-golden-behaviour-during-crisis\/\">gold<\/a> to fixed\/recurring deposits or equities. These<strong> <\/strong>investments will multiply your savings in the long term, and the compounding effect will ensure that you meet your retirement corpus goal.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Start\"><span class=\"ez-toc-section\" id=\"When-to-start-retirement-planning\"><\/span><strong>When to start retirement planning?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The right time to start planning was yesterday! The next best time is today, just don\u2019t leave it for tomorrow. It is always beneficial for you to start as early in your career as possible when you have limited liabilities.&nbsp;<\/p>\n\n\n\n<p>For example, if you\u2019re 25 and need a corpus of Rs 2 cr when you\u2019re 60, you just need to save and invest Rs 3,500 each month in a scheme offering 11-12% returns. It will give you Rs 2.3 cr when you turn 60. But, if you start the same when you\u2019re 30 yrs old, you will only receive Rs 1.2 cr when you\u2019re 60. This is why you need to start your retirement planning early.&nbsp;&nbsp;Sit with your financial advisor and plan everything from corpus estimation to investment horizon. Choose suitable asset classes to invest in so that your money is safe even if the returns are not exorbitantly high. Security of your investments is the key here; don\u2019t fall for quick gains and end up investing in a volatile asset class if your retirement is near.<\/p>\n\n\n\n<p>However, if you have many years for your retirement, then <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-equity\/\">equity<\/a> asset class can be a good option to build your retirement corpus. This is because you have many years left to retire and compounding effects will work on your equity investments. There are many companies and online portals that formulate a <a href=\"https:\/\/www.tickertape.in\/blog\/plan-retirement-the-scientific-way\/\">plan for your retirement<\/a>. In a nutshell, don\u2019t wait to turn 40-45 yrs old. Start now.&nbsp; &nbsp; <\/p>\n","protected":false},"excerpt":{"rendered":"<p>Many of us tend to procrastinate and then retire with not enough money to make ends meet. This is why retirement planning is important<\/p>\n","protected":false},"author":46,"featured_media":2776,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[8],"tags":[296,295],"acf":[],"modified_by":null,"jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/05\/Retirement-planning.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/2773"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/46"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=2773"}],"version-history":[{"count":5,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/2773\/revisions"}],"predecessor-version":[{"id":10059,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/2773\/revisions\/10059"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/2776"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=2773"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=2773"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=2773"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}