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Retirement Planning Guide

By Finserv MARKETS - Apr 29,2020
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What Is Retirement Planning

Most of us imagine spending retirement days relaxing at home, while some of us plan vacations with family and friends. After working tirelessly all your life, spending some quality time by yourself or with your loved ones is what retirement is all about.

For salaried employees, retirement days put an end to their daily life struggles. However, to enjoy your retirement without the hassle of falling short on finances, it is essential to plan for it beforehand.

This is where a retirement plan comes into the picture. Along with a blissful retired life, you also get to enjoy financial independence. In this article, we will be discussing everything you need to know about retirement planning.

Let us begin by understanding what does retirement planning mean.

What is Retirement Planning?

An effective retirement plan is nothing but constructive steps that helps you build wealth for your retirement days, and allow you to lead your current lifestyle effortlessly. According to the thumb rule, you need to collect at least 70-90 percent of your income to lead a worry-free retirement life.

For instance, if you earn INR 70,000 monthly then you may require at least INR 50,000 – INR 65,000 monthly during retirement. So, if you plan to retire in 15 years, you will have to draft a retirement plan in such a way that it allows you a monthly source of income between INR 50,000 and INR 65,000 after you retire.

On the other hand, you also need to make wise investment decisions like investing in high-return assets so as to grow your savings at a faster rate.

Why is Retirement Planning Essential?

As you near old age, your ability to carry out daily tasks diminishes. Your hospital visits may increase significantly too, as medical emergencies can arise anytime and anywhere. As you grow older, your responsibilities in the family increase alongside. You have to take care of the financial needs of your parents, spouse, and children.

It is necessary to have sufficient savings that will help you deal with crises (financial and medical) after retiring. With so much constantly going on in life, you might lose focus on planning for retirement. This is precisely why one needs retirement planning.

Top Reasons You Need Retirement Planning

Following are top reasons why you need retirement planning –

  • Medical Emergencies

As you grow old, your health concerns rise. Having to deal with frequent hospital visits can make a dent in your savings, especially during retirement. As per studies, medical inflation is between 14-15 percent every year. In simple terms, the medical expenses become at least 4 times what they were a decade ago.

With an appropriate retirement plan, you no longer have to worry about increasing medical costs. With a significant amount of savings in your retirement plan, your medical needs will be taken care of.

  • Inflation

The cost of goods and services increase over time. Even though the impact of inflation is small in the short-term, it can still be significant over a few years.

For instance, a 5 percent inflation will mean INR 100 will hold the value of INR 95 a year later. This means a lump-sum amount of INR 21 lakh will hold the same purchasing power as INR 7.5 lakh after 20 years if inflation grows at 5% every year.

During retirement days, you may no longer have to pay-off EMIs. But you still have to continue paying for other expenses such as groceries, medical costs, and other utility bills. In such situations, the right pension plan for you will take the anticipated inflation rate into account.

  • Nuclear Families

The Indian tradition of big families is changing as more and more couples are going nuclear by staying separately. Moreover, young couples are giving importance to family planning. With the pressure to earn a decent living in this ever-changing economy, your kids may not have enough resources to allocate to you.

Considering these situations, you have to start planning for your retirement at an early stage. This way, you will have enough money in your savings and do not have to rely on your children for financial help.

Steps To Plan Your Retirement

The following are five steps that will help you plan your retirement efficiently.

  1. Set retirement goals –

Retirement goals are things that you plan to do during your retired days. Most of these will require finances to accomplish. Hence, accounting them in retirement planning allows you to build a sufficient corpus.

  1. Assess the current financial situation –

Your financial situation in your mid-30s will be different than it was in your mid-20s. To plan correctly for retirement, it is essential to assess your current financial situation. Don’t worry about starting late. Even if you start investing INR 10,000 towards retirement plans from the age of 35 years, you will be able to build at least INR 1.3 crore by the time you retire. This amount is calculated based on 10% annual returns. The same will be more in case the returns are between 12-15 percent per year.

  1. Calculate the amount of money you need for retirement –

You will be able to understand this after you evaluate your current lifestyle expenses along with the things you plan to do during retirement. Then, with the right retirement plan, you will be able to save an amount that is close to the estimated amount.

  1. Identify retirement planning builders –

Along with your savings and provident fund account, retirement planning is another way that allows monthly income resources even after retirement. Certain insurance plans available in the market are specifically designed taking retirement planning in India into consideration. It encapsulates the growth potential of equity and debt funds along with guaranteed capital growth under any circumstances.

  1. Set up a system to generate monthly income during retirement –

 Many retirement plans can be set up in such a way that allows for monthly income even during retirement. With this, you will receive a fixed amount at regular intervals as chosen by you when buying the plan.

Retirement Planning Options Available On Finserv MARKETS

We at Finserv MARKETS offer Unit Linked Insurance Plans (ULIPs) for retirement planning. Although ULIP plans are primarily an insurance instrument, a part of the premium is accumulated as investments until you retire.

Here, one-third of this accumulated amount is paid back to you while the remaining is invested in an annuity scheme. The returns generated from this scheme are then paid as pension to the policy-holder.

Importance of ULIPs in Retirement Planning

In the end, the objective of retirement planning is to ensure that you have a monthly source of income to take care of the daily expenses even during retirement days. Having sufficient income during the retired days gives you all the more confidence to take care of your financial needs as and when needed.

Although life insurance plans help you secure the financial future of your loved ones in case of your sudden dismissal, retirement planning is more about taking your financial needs into consideration.

To adhere to the financial needs of yourself and your loved ones, even during retirement, one can consider buying ULIPs. ULIP investments are goal-based insurance plans that also provide the benefit of wealth creation. It allows you to save and grow money for the future (in this case, retirement) while providing insurance coverage simultaneously.

As explained earlier, a part of the premiums paid in ULIPs is accumulated as investments until you retire. Then, one-third of the accumulated amount is invested in market-linked funds. The returns earned on these funds are paid as pension as a lump sum or in installments.

You can invest in ULIP retirement plans available on Finserv MARKETS to secure your post-retirement life. It not only secures your future but also offers benefits such as tax benefits, life insurance, and market-linked returns.

At Finserv MARKETS, you can also browse the ULIP child plan to prepare for your child’s bright future.

“Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App.”

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