A retired life is a longer one and young people often don’t understand the financial implications involved in this phase of life. Just to give you a back drop the average Indian life expectancy is around 78 years and even if one looks at it mathematically, once you retire at the age of 60 you will still be required to keep savings intact for a good long 18 years. Saving and investing towards retirement is a combination of investment to accumulation and then disinvestment of the same to meet the financial needs during the retirement life.
During your working life you accumulate money and after retirement you withdraw it, the remaining amount has to stay invested and it should keep growing at a rate higher than the inflation rate. Also make sure you have adequate health insurance cover during retirement period because rising health care costs can really offset your best retirement plans.
One thing that I have noticed based upon my several interactions with investor of young age is that when they start earning because they have number of savings goals and the ever increasing usage of plastic money they are tempted to postpone their retirement goals.
So as like any other investment goal it’s a long term saving project – while one is required to invest judiciously into financial instrument that generates income what is more important is to control the risk with your investments in this phase. Your retirement needs would depend on your priorities, age, income etc but one can only build a sizeable corpus if you start your investments early in the during the accumulation period.
The other important pre-retirement milestone is when you start approaching retirement , let’s say when you are 45 years old and you are just 15 years away to retire this is the time for you to put a plan in place making sure your finances are lined up correctly for retirement days so that you don’t leave anything to chance.
Another phase is your withdrawal stage – when active income stops for you and you start using your savings through EPF and other savings that you have made over the years. You need to be aware there are 3 primary tasks at this phase of your life :-
Point Number 1 – Assess how your finances are working now that how are you going to use for retirement savings?
Point Number 2 – Do you need to modify the investment strategy?
Point Number 3 – Do you need to make changes in your living circumstances?
Point Number 4 – Are there any unexpected events that occurred in the past that would require you to re-evaluate your investment approach?
The last aspect of this phase is thinking about continuing investments which beats inflation but exceeds it, thus becoming a second source of income in the long term.
Investments does carry a risk, but if you exercise due diligence and with some knowledge the goals can be achieved. The idea behind this write up was to make people aware of not ignoring retirement goals to the last days. Instead one should plan and plan well in advance for their sunset years. After all you deserve a good life after working and toiling hard for so many years.
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