As the quality of living and life expectancy figures are improving, people are leading longer and healthier lives with improved medical and social facilities. However, this boon of modern life also calls for proper financial planning. The golden years of life- after retirement – are increasing. As the income stops, you need a secured amount in your bank balance to sustain a good lifestyle that you demand. Here are some easy ways to get started with post-retirement finances.
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1. Plan the corpus required
There are several easy tools online that can help you arrive at a target amount that you will need to save. You can also consult a trusted financial adviser to help you work out the numbers. This amount will vary from person to person. It depends on your lifestyle and your individual requirements in your post-retirement years. For example – if you want to continue your membership of the best golf clubs, you will need to save something extra. If you plan to lead a quiet and simple life, the goal will differ. Arrive at your target number and plan towards achieving it.
2. Manage your debts
If you are planning to secure a loan, you should plan in advance on repaying it first, before saving for retirement. You incur an interest payment on every debt. It is important to factor it in your calculations and plan to clear all debt way before your retirement age. The final working years should yield good savings that can be invested for the years ahead.
3. Subscribe to retirement savings plan
If you have not paid attention to your employer’s 401 (k) and other plans, please enroll now. Try to make a healthy contribution towards your retirement corpus. In several schemes, the employer makes a contribution to your corpus. There are also tax savings for your income. You should also check for any other pension plans that you (or your spouse) may be entitled to. Over the years, the saved amount will grow and the magic of compound interest will ensure a healthy fund for your post-retirement years.
4. Factor in inflation
Inflation always works towards reducing the value of the money you have saved. Whatever you can afford today with a dollar, will cost a lot more after a decade. The bank interest you earn on your savings may not be enough to beat inflation. Hence, a part of your savings should be invested aggressively. The propensity to take risks will vary for each person. Based on your comfort, invest in stocks and mutual funds. Since you are planning for the long term, there are good chances of getting a very good return on your investments. Fluctuations and market cycles of boom and bust get evened out over the years. You will always get opportunities to reap dividends and re-invest them further. As you approach your retirement age, you should move your savings to safer havens and stay away from volatile stock markets.
5. Place your eggs in different baskets
In order to safe-guard your investments, try to diversify risk. Invest in different types of funds, stocks, bank accounts and real estate. This ensures that the returns on your investment will not go down, even if one sector of the economy goes through a trough. But as you approach your fifties, you should start simplifying your life and reduce the complexity and spread of your investments. For instance, real estate is not easily solvent. You may not be able to manage your estate in your old age. You can decide to sell the asset and keep the money in your savings account for the post-retirement phase.
Thus, there are simple ways to plan for your post-retirement finances. All it takes is some planning and discipline to save a little every month. The golden mantra for saving for post-retirement is best summarized by Warren Buffet, in his famous quote – “Do not save what is left after spending, but spend what is left after saving”.
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