5 Important Retirement Planning Steps to Take

While the word retirement connotes a kind of cessation, you – actually speaking – retire from work, not life. Subsequently, post-retirement life may be just as abuzz with activities and crammed with goals – only different from those of the past. A crucial aspect of post-retirement life is to make sure your daily lifestyle is maintained without having to worry about expenses. This calls for sound and steady planning over the years in order to build a financial cushion to lean on once you hit retirement age. It must be noted that planning well before your anticipated date of retirement – even as many as 10 years before – is ideal. Doing this gives you ample time to make any necessary adjustments with regard to your current earnings and savings. Elucidated below are a few crucial retirement planning steps to take if you think you are approximately a decade away from retirement.

Why Plan for Retirement?

With the average life expectancy having risen over the years, people are living longer lives, increasing the need for higher post-retirement expenses. Moreover, you would want to maintain the same standard of living even after retiring from active work. You should also be prepared for the worst by setting aside funds for unforeseen medical complications. Most of all, it is important to keep living with your head held high, independent of support from grown-up children.

Five Key Retirement Planning Steps

1. Envision Your Retirement Days

Retirement planning isn’t just about finances; it calls for a combination of financial and personal planning. You must begin by visualizing the kind of retirement you want. For instance, would you like to work part time or travel? Next, you need to have a realistic outline of the financial resources you may need towards this end.

2. Make an Estimate of Your Retirement Income & Expenses

Calculate your predictable income from sources such as pension and provident fund. The rest of your retirement funds would need to come from personal corpus of savings, rental income, and investment accounts. Taking inflation into account, you need to make a rough estimate of your future expenses. This must include daily expenses, healthcare, and post-retirement goals – if any – such as travelling or buying a house.

3. Make Sure You Have Diverse Investments

It is wiser to invest in an array of asset classes such as bonds, stocks, real estate, mutual funds and other assets that suit your risk appetite, liquidity needs, and investment time horizon. A well-balanced portfolio will yield returns that are higher than the inflation rate and help you generate the kind of income you will need to cover expenses over the long term.

4. Reduce Your Debt

If you are currently paying off a loan or mortgage payments, accelerate those payments so the loan is paid off before you retire. If you use a credit card, consider using cash instead for major purchases to restrict the accumulation of new debt and reduce existing debt. This way, you can minimize the amount of retirement income that will be spent on EMIs.

5. Make Contributions to Retirement Savings

As you near retirement, make increased contributions to your voluntary provident fund, or National Pension Scheme account whenever possible. If you have made sporadic contributions, make sure to catch up on payments to set aside more than the usual contribution. Do speak to a tax professional to avail maximum tax benefits.

Last but not least, it is imperative to open a senior citizen savings account after retirement. With a host of exciting features such as a higher interest rate, lucrative offers, reward points on debit card, discounts on locker, and convenient banking services such as cheque pick up & drop, a senior citizen savings account will further help you save and manage your finances.

“Prakhar is a, writer, and author of the new novel We Were Already There.” If your work has won any prestigious awards or earned bestseller status, make sure to mention that here, too.