Everyone wants to have a comfortable retirement, but without adequate planning it probably won't happen. People are living longer than ever before, which is obviously good news, but that means retirement is becoming more expensive.
Consider this: Only 11% of the working population in India has any form of social security for old age * (Source: Document on Pensions, Life Insurance Corporation of India, 2004).
We list for you a 5-step plan that should put you on the road to retirement planning.
Step 1: Start early, and retire peacefully
Never delay in planning for retirement. Start as early as possible. Make a list of your financial goals and what you own so you recognise the gap between the reality and your dreams.
When you are young, your risk-taking capacity is high. Earning well, and then generating as high a rate of return as possible, is top of your agenda.
For example, start saving for retirement at age 25, so that even if you wish to retire by 60, you have an investment horizon of 35 years.
The longer the investment horizon, the longer you can save and benefit from compounding. If at the age of 25, you start investing Rs 1,000 per month at the rate of 6% compounding then the maturity amount (when you are 60 years of age) will be Rs 1,380,290; alternatively if you commence the same investment at the age of 35, then the maturity value at the age of 60 will be Rs 679,580.
With a 10 year lag, the retirement savings at 60 years is more than halved!
Step 2: Have a plan
Assess your incomes and expenditure, and make provisions for contingencies. For example, set aside some money for travel and medical expenditure post retirement. Make a list of things you own and those that you wish to own e.g. a car
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