Importance of Retirement Planning
Retirement is the best time to fulfil all your life goals.
So have you done any planning for the same?
Most young people think retirement is a long way off. However, it is very important to plan your life post-retirement if you wish to retain your financial independence and wants to maintain a comfortable living standard when you are earning no more.
So before we dig deep into the importance of Retirement Planning, let’s understand what Retirement Planning is and why you need to plan early in life?
Retirement planning simply refers to allocation of savings solely for the purpose of retirement. The goal of retirement planning is to achieve financial independence.
Every one of us wants to retire comfortably but the complexity involved in achieving our retirement goals successfully requires us to make a sensible planning and years of persistence. Moreover, instead of feeling the pinch post-retirement, it’s better to develop the habit of saving early. You just require an attainable saving, plan your investments and with a long term commitment.
Here are some of the reasons why you need to plan for your Retirement :
1. Spend retirement in your way
The amount of money you save and invest now will say how will spend your retirement. Everyone has a goal in life and retirement is the best time where you can fulfil all your goals and transform your dream into reality.
The way you want to spend your retirement totally depend upon the amount of money you have saved and invested. Everybody has a goal in life and retirement is the best time to fulfil all your goals and transform your dream into reality. But you need to be financially sound to do this; otherwise, the problem of fulfilling your basic needs like feeding or clothing etc will keep daunting you in your retirement days.
2. To meet unforeseen medical expenses
Old age is often accompanied with medical problems and very high healthcare expenses. In order to prevent your unforeseen illness from cleaning away your retirement savings, you should opt for medical insurance to finance any sort of health care requirement. There may be a situation where you cannot work any longer and the savings for retirement will help to ensure that you are well cared of. Hence do start with your savings.
Without any good amount of savings, it will be difficult for you to maintain your living standard and you might have to restrict yourself what your social security scheme provides. Moreover, the situation may be more alarming in case of serious health problem.
3. Planning for your kids
Your kids are another important reason why you need to save for retirement. Many individuals have to face financial problems for a simple reason that their parents haven’t plan for their retirement. In today’s era of high inflation, meeting the heavy medical expenses along with the needs of your family is really very difficult.
It is often seen that the retirees become burden to the family who are unplanned and haven’t saved anything for their children. It’s always a good idea to start with your savings habit in your early days so that you don’t need to put any extra effort to save for retirement. Moreover, it is the responsibility for every parent to help them with their career rather than making them the victim of your own financial difficulties.
4. To beat Inflation
As you need to worry about it you need to account for it as well. You need to take into account inflation while calculating your retirement funds as well as your future expenses. It is often seen that the money we save is often eaten away by inflation. Hence, making a plan to overcome inflation is really important.
5. Uncertainty of social security and pension benefits
Most of the people would say that they have enough social security benefits to fulfil their post-retirement need. Many financial advisors believe that you need around 70-75% of your income to live your life comfortably after retirement. However in most cases it is seen that a person receives just 40-45% from these benefits. Hence, you need to start with your savings since you cannot totally rely on social security benefits to survive.
The earlier you start, more likely that you will be on track with meeting your goals. However if you start late, it may happen that you have to sacrifice or adjust yourself with your pre-retirement and retirement lifestyle. Moreover, the amount that you need to save and add each period will depend upon how early you start saving.
Starting with your retirement planning in twenties may seem too early for your retirement. But starting early really makes it easier to reach your goal. Moreover starting early will allow you to develop good retirement savings and planning habits and give you more time to rectify any mistake and to identify any shortfall in achieving your goal.
Mr Ankit Jaiswal – Knowledge Associate at Elearnmarkets.com. A commerce graduate from St. Xavier’s college, Kolkata . He strongly believes in the following saying by Warren Buffett- “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it”
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