Retirement was so simple for the Baby Boomers and Gen X. Gone are the days with a quantifiable, largely-risk free pension that followed a career-long loyalty between employer and the employee. It is now widely recognized that the attitude of the millennials towards pensions and savings is different from that of the previous generations. They value experiences and spending over saving.
The corporate world and the government have also contributed to making millennial retirement planning difficult. A recent Deloitte survey revealed that millennials leave their jobs within two years of joining due to a lack of loyalty to their companies. With non-linear career paths, characterized by working on multiple jobs or frequent job changes, the creation of a single large pension corpus so valued by previous generations is nearly impossible. However, prudent financial planning can create that big corpus of pension, and here are a few pointers to help you arrange for your peaceful post-retirement life:
- Early Bird Planning: Early planning means reaching your goal as soon as possible. Think and gather investment ideas that can help you save to reach your financial goal of retirement early. Saving is key to investing and if you fail to invest, you won’t be able to accumulate the kind of money you want by the time you retire.
- Follow the plan religiously: Sticking to the devised investment plan, and executing it properly until your financial goal is achieved takes a long time to accomplish. Ensure that you do not divert your retirement savings or stop saving abruptly.
- Choose automated savings: A reliable plan to achieve your retirement goal more is to choose the automated investing route. Instead of investing a lump-sum amount periodically, invest in mutual fund systematic investment plans (SIPs) that allow you to pay small amounts on a monthly basis through Electronic Clearing Service (ECS). Mutual Funds are investment tools wherein a number of entities/people (investors) who share a common financial goal invest capital. Purchasing mutual funds online enables you to choose the ECS payment option, and it is recommended to invest in mutual funds from trusted online platforms like Finserv MARKETS, before buying the right ones. At Finserv MARKETS, you can open a free mutual fund account with no brokerage involved, and invest in top-rated mutual funds that suit your risk appetite and investment goals with zero commission. With a mutual fund account, you can opt for systematic investment plans (SIPs) of top-rated mutual funds offered by players like DSP, Aditya Birla, HDFC, L&T, etc., and also receive detailed portfolio summaries and insights into performance of your investments. Going with the ECS option will deduct your amount automatically on a pre-decided date every month. This process can go on for a fixed number of months or even done continuously till the time the investor wants to stop it.
- Be Debt free: It is important to get rid of any debts as you reach retirement, and owning a home can be an added advantage. Keep your expenses in check, and make sure your annual living expenses do not exceed 5 percent of your savings in retirement.
- Review your investment plan regularly: A review of your investment plan once in every 3 years is recommended to keep abreast with your returns or alternative investment options that can potentially multiply your savings quickly.
- Cut back on needless expenses: In a world where social media fuels consumption, it is essential that you periodically review your expenses to ensure that a large chunk is not going towards frivolous expenses. Maintaining a budget is a good way to keep a general track of where you money is going, and cutting back when it exceeds pre-determined limits.
Bracing for the Challenge
It is easy to imagine that by the time the millennial generation reaches retirement age, health may become less complicated and robots may look after the elderly. Despite this, enjoying the post-retirement life requires careful planning long before you reach them. Retirement planning is crucial once you understand that you will retire one day when you’ll stop drawing a monthly salary. With no chance of a pension at all, clearly the highest priority is to get more millennials to just start building their pension wealth. Once started, continuously feeding the pot becomes paramount. It is therefore critical for pension savings to move up the pecking order of millennials’ financial priorities. Education and engagement are central to achieve this.
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