How To Plan A Financially Secure Retirement?

How To Plan A Financially Secure Retirement

Started saving for your retirement? Are you saving with the right goal? Will you have a financially secure retirement? Read on to find out how you can plan it…

Many of us have a stable income ensuring us stability and security in our work-life. We are able to match our expenses, able to spend on our needs and are able to afford a luxurious lifestyle often pampering ourselves with the gifts we desire and the thrills we need.

While spending and living the life we desire and enjoying at the moment, we always have a thought creeping in our minds about the future. We might feel confused and tensed.

Future, the unpredictable future, one you cannot know for sure and one you are always in a dilemma about. No one knows how the world will be like in the future but one thing is for sure, that we will all grow old and retire.

We cannot be working all our life earning the same salary, doing the same job.

So, to ensure financial stability during retirement, here are some ways: 

Setting Goals For Future

Financially Secure Retirement by setting goals

To reach somewhere you need to find that ‘somewhere’. when you find it, it becomes your ultimate goal.

Now when you are planning for a financially secure retirement, you need to set goals that are long term. They define how much you need to save while you earn and spend too.

These goals will also decide how and where you want to live in retirement and how luxurious life you want to live then. It is important to realize goals will probably change as time and situations change.

You need to set some financial and lifestyle goals, this starts your planning for retirement. How you implement these goals is important wherein you need to make sure you maximize savings and minimize taxes on the savings.

Also, you would need to make sure that you keep a check on expenses and set age specific as well as age appropriate goals. Also, growing whilst developing, monitoring is very important to track your progress. 

Start Paying Attention To Time

Timing is everything that is important. Normally a person plans on retiring at the age of 60.

So according to this, it is a decisive factor as to when you retire. Your financial goals may change depending on various factors like declining health due to the ageing, financial loss which was not speculated.

Timing is important because it’s only after a certain age when you get to draw money out of your retirement savings account without incurring any penalty. Start building your retirement fund with these easy tips.

Before that age, you are liable to pay taxes. On the other hand, if you don’t plan on retiring early or don’t need to take money out of your account earlier, let your savings account grow and keep contributing to it. 

Start understanding Saving options Available For Financially Secure Retirement

Financially Secure Retirement by understanding saving options avaialble

You need to understand the employer-sponsored savings plan. Starting with the basics, what some of you may have heard of the Provident Fund.

It is basically a workplace savings plan and a way people get some extra money from their employers. This proves to be a smart option to make money.

In India, the most pension options are EEE or EET ( exempt on investment, exempt on interest, exempt on withdrawal). We have the EPF and PPF where the amount is tax-free up to a limit.

EPF or PF is Employee Provident Fund, under this scheme, employee has to pay a certain contribution and an equal contribution is paid by the employer. The employee will get the sum of these amounts.PPF is similar to EPF but employer contribution is not the factor of dependency. 

Now, when we talk about EPF and PPF, they are both very conservative. Why do I say this?

The government announces these fixed rates. In addition, the person investing has no discretion in what it invests in.

These financially secure Retirement savings tools, combined with effective and tax-efficient investment techniques, will provide you with the best insurance you can have when it comes to avoiding financial disaster and a good retirement. 

Start Planning for Extra Income For Your Retirement

Extra income

Retirement is considered to be one such time to relax and be free. It is a time to give yourself a break from all the work, stress, responsibilities one has dealt with and gives a journey to help get at peace with life.

But for some, you may have heard from some elderly telling how things have been the same for them and they have been working the same amount of time they did before retirement.

You can start building multiple sources of income.

It may be because they are engaged in doing different things which bring them contentment or are too busy fulfilling their dreams which could not be fulfilled else wise.

For others, staying busy means they are busy earning the extra income other than the pension they receive. Some people buy and manage investments.

Others took to starting a business and catering to their needs requiring extra income. Some people also take part-time jobs, both for extra money and building more connections in society.

Now, appealing it may look but it is really a thinkable task to understand the taxes related to the extra income.

Some benefits that you enjoy in retirement may decrease the sum you gain owing to your age and how much income you are already earning. Thus the total income you gain may remain the same. 

Plan Retirement With Your Partner

Financially Secure Retirement by planning with your partner

Retirement is something that not only you, but your partner needs to face too. This is where it gets complicated.

What factors we discussed earlier may become different for you and your partner. They may have different plans, completely different from yours.

You may retire sooner or later than your partner and that makes the decision thinkable as to what are your goals and your partner’s goals. Also, this defines how you plan to earn extra income and spend it.

So the timings need to be taken care of to ensure that both you and your partner gain maximum benefit out of your pension plans. Shifting a little from financial matters, talking of emotional and personal issues I.e when one of you retires and the other person keeps working, there are gonna be changed in the management of household as to what are the new and improvised responsibilities one should be willing to cater to.

When you both retire at the same time, it’s an overwhelming situation as to how are you gonna step into the retirement life together. Hence it becomes stressful too. If things don’t go well with your spouse and you plan on getting a divorce, in some case you may have to split the pension and retirement savings with your ex-spouse. 

Most of us start planning the retirement journey after 50 and this is the time when you save up an extra penny. But before you retire, a couple of years before retiring you need to check on some issues like house repairs, health conditions of you and your partner and other miscellaneous things to take care of.

You may want to ensure that these things are covered while you still have a salary in your hand and health insurance to cover you while you enter your retirement.  Here is how you can plan for unexpected expenses.

Now, when you think about Financially Secure Retirement retirement, you might want to search the pension plans available in India. Let us see the same : 

PENSION PLANS IN INDIA 

Pension plans are plans maintained by employers that help individuals secure their financial future and protect them from any uncertainties that may arise after retirement.

These plans ensure financial stability and make sure that you are clear with your goals and achieve them.

They offer you the dual benefits of investment and insurance. Investing a little by little in the pension plans ensures that you have a steady flow once you retire. As stated earlier, PPF (public provident fund) is a really popular scheme. The plans available in India are as follows: 

● DeferredAnnuity

The Total sum is provided over the tenure. You receive the pension after completing the term. There is no taxation until and unless you want to destroy the corpus.

Immediate annuity Only lump sum investment is allowed in this plan. Pension begins immediately after investment. Income tax-exempts tax on the premiums.

The nominee has and can claim the pension after the death of the policyholder. 

● Annuity Certain

The pension is provided for a specific period. The policyholder can choose the age he desires for example – age 60-65. The nominee can claim the pension or the corpus after the death of the policyholder. 

● Withcover pension plan

The Cover pension plan provides ‘cover’ I.e after the demise of the policyholder, the people who are dependent on the policyholder. This benefits when the policyholder is the only person through which his or her family gets any money.

This pension plan is good with only one drawback that most of the premium goes into building the corpus and hence the investment amount is low. 

● Life annuity Pension

It s paid till the death of the policyholder. One can opt for the spouse to receive a pension after their demise. 

● NPS ( national pension scheme )

This is a scheme launched by the central government. The money is distributed in equity and debt markets as per the preference set by the policyholder.

On retirement, withdraw 60% and the rest should be used to buy an annuity. On 20%, the tax is levied and is withdrawn upon maturity. 

● Pension funds

It provides better returns upon maturity. It is regulated by the government, PFRDA ( Pension Fund Regulatory & Development Authority ). Currently, 6 fund houses in India are authorized to offer pension funds. SBI is one of them. 

Financially Secure Retirement Tips To Remember

Financially Secure Retirement Tips

Do not choose a product only because of tax exemptions. Understand the policy before jumping and opting the cheapest one. Put the amount into plan considering your current income. 

The road to financially secure retirement includes setting goals, timing properly, taking advantage of retirement savings options and extracting best out of them. You need to start understanding the process of taxation and tax benefits, planning with your partner, and staying on top of it all and never losing when you actually get there.

You’ll need to monitor your progress every step of the way and make adjustments when needed. 

The retirement may be a difficult time for some but when planned properly, it may prove to be the most beautiful and relaxing time.

Keep following Bachat for more personal finance tips.


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