Know the Importance of Retirement Planning


It is obvious for people to not feel the urgency for retirement planning when they are young. Who wants to think about how they will be in their old age when they are enjoying the fruits of their youth? However, it is important to plan for retirement just like one plans for their life’s other financial goals. Retirement planning and financial planning are two sides of the same coin. When planning your investments, retirement planning should be a top priority. If you want to make sure that you are financially independent in your post-retirement era, then retirement planning is essential. Irrespective of whether you want to settle in a villa in the countryside with your better half or want to go on a tour of a lifetime, retirement planning is done well beforehand will always help you achieve your dreams.

So what exactly is retirement planning?

In simple terms, retirement planning is saving and investing a portion of your monthly income regularly in such a way that by the time you attain the age of retirement, you have a commendable retirement corpus in your hand that is sufficient enough for the next 20 years at least. One can also opt for a retirement plan that offers steady income post-retirement that will allow an individual to take care of their recurring monthly expenses like house rent, utility bills, groceries, etc.

What is the importance of retirement planning?

When you grow old, you are going to need more financial resources for sustaining than you need now. The chances of your medical bills going up are high. Inflation is making the cost of living go up year after year and your current savings may lose their worth by the time you retire. This is another reason why several financial advisors recommend investors invest their savings in different investment schemes based on their risk appetite.

No 401(k) plan like the US

Like the United States of America has a 401(k) plan for its senior citizens which allows them to enjoy several benefits, India is yet to adopt any such plan or policy for its elderly population. Even government employees are not eligible for pension anymore which means that saving and investing is the only option for building a decent retirement corpus. Also, if there is any pension it is below the standard of living and one can barely tend to their needs with the pension money. Provident Funds offer just 8% interest which again is not enough to have a financially independent retirement life.

Do not depend on your children

Failing to have a proper financial plan for retirement can lead to parents burdening their children with financial responsibilities. The last thing you want is to financially depend on your children or your estranged relatives after retirement. One of the best ways to ensure that you can accumulate a commendable corpus lead a secured retirement life is by starting a monthly SIP in a retirement mutual fund.

What to start a SIP in a retirement mutual fund?

Investing in a solution-oriented scheme like a retirement savings fund is a good idea as it allows investors to save and invest a fixed sum via SIP while investing in the mix of equity and debt. These funds come in a conservative, dynamic and aggressive plan thus catering to investors with all types of risk appetites. Investors can even use an online SIP calculator to compute the total retirement corpus which they will be earning at the end of their SIP investment journey. Mutual funds do not guarantee returns and hence please talk to a financial advisor before investing.