Retirement mantras: Act before retirement begins

Retirement mantras: Act before retirement begins

Your retirement years could run into decades, and only the correct planning in your working years can help you tide over any crises that occur in the future.

Retirement is a golden phase in every person’s life. It is a time to sit back and reap the rewards of a lifetime of hard work. However, the comfort you seek in your post-retirement years can come only if you plan for it right now. The following are important retirement planning mantras to adopt today:

* Save money from the time you start working. Though retirement may seem like a distant event on the horizon today, it is never too soon to start saving money for it. As the years pass by and many obligations pile up, you will find it increasingly difficult to set aside savings every month if you are not used to doing so. Setting aside Rs 5,000 per month to begin with, and increasing this amount annually, will create a big savings fund by the time you retire. You can earn bank interest on it, or invest part of the money in fixed deposits, endowment insurance plans and other suitable instruments.

* Invest in pension plans. You should buy a pension plan while you are still a long way from retirement and earning a regular income. The plan pays annuities throughout the rest of your life after you retire, and also pay your spouse a lump sum benefit (comprising the premiums paid till that time) in case of your unfortunate demise. Before you look for the best pension plans, be sure to use a retirement calculator that helps you compute the money payable on maturity. The retirement planning calculator also helps you compute the death benefit of the plan, the tax benefits inherent in it, and the earnings on maturity.

* Invest in equity funds and debt funds. Since you are still employed and have a moderate risk appetite, the best way to create a comfortable corpus for your future is to invest in equity and debt mutual funds. An experienced financial planner can help you choose the best funds in line with your future goals. Besides, you can also check out options like ULIPs (Unit Linked Insurance Plan), ELSS (Equity Linked Savings Schemes) and STPs (Systematic Transfer Plans) for high returns that can create a comfortable nest egg.

* Keep returns from FDs and other instruments for daily life. You might invest in relatively ‘safe’ instruments like fixed deposits and Public Provident Fund (PPF) whose rate of interest does not waver over the tenure. However, be sure to calculate the projected actual earnings on the FD account basis taxation on interest payable. Also, the matured amount is better set aside for daily living post-retirement. You may also reinvest the money if you have no immediate use for it post-retirement, at 0.5% higher interest rate for senior citizens.

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