When planning finances, one of the key aspects that one should never ignore is retirement. Your retirement will be an age where you will not have a regular and steady income. So, you must do everything you can when you’re younger to plan for when you retire. Nowadays, the trend is slowly shifting towards building a considerable retirement corpus and retiring early to enjoy the luxuries of life.
If you’re in your 30s and think that retirement is too far off to think about now, you may be mistaken. The key to a comfortable retirement is starting early to get the benefit of compounding when investing for retirement. Let us look at other key steps that you must take for proper retirement planning.
Calculated estimated expenses post-retirement
You must first know how much money you would need after you retire. The best way to do that is to chart out a timeline with regards to your own life as well as the lives of your family. When will your children require higher education? When will they require marriage expenses? What other major expenses you’d have after retirement? Calculate these expenses and make a budget for them. This will give you an idea on the corpus you should be looking at.
Create an emergency fund
Now how does an emergency fund factor into retirement planning? Believe us, it does! When you don’t have an emergency fund, during unpredictable times of need, you will be tempted to look into your retirement fund as a financial source. To avoid his pitfall, you must first build a contingency fund. This will help you greatly not only during medical emergencies to pay hospital bills, but also take care of unforeseen circumstances that can hit your savings.
Don’t be too conservative when investing
If you are to build a significant corpus for retirement, just sticking to safe investment options to safeguard your money just won’t do it. Your money will be safe, but you won’t be able to beat inflation. What you need is a good amount of growth that only equity investment can provide. Keep a balanced portfolio and invest in equity with well calculated risks.
Start as early as possible
The power of compounding means that even a few years delay in investing will significantly lower your returns. Hence, when investing for retirement, start early. Don’t just invest for your immediate and short-term financial needs. Think long and start investing small amounts for retirement separately.
Avoid withdrawing from your retirement corpus
This is a cardinal sin that many people have the habit of. Do not ever remove funds from your retirement corpus or even your PF account. Even if you leave our job, transfer the PF to the new employer and do not withdraw the amount. Not only will your retirement fund take a hit, but your balance funds will also be taxable if withdrawn within 5 years.
Thus, if you’re already in your 30s and looking to settle, keep a thought aside for retirement planning as well. Follow the above steps and start your retirement planning as soon as possible.