Why You Should Embrace Retirement Planning?
By Akhil Chugh
Date June 9, 2024
Retirement planning is often easy to postpone, especially when you are young. During the early years, investors typically prioritize short-term goals like children’s education, real estate, and marriage over retirement. Many do not recognize the importance of retirement planning because it is an extremely long-term goal, which often leads to it being delayed as it seems easier to achieve later.
This is reminiscent of the famous story of the ant and the grasshopper. The grasshopper delayed storing food for winter, as it seemed too far away when the sun was shining bright. When winter arrived, he found himself without food and shelter. Similarly, if we prioritize short-term goals over retirement planning, we risk facing significant hardships in our later years.
It is very important to realize that the normal working life of any individual is till 60 years and assuming a life expectancy of 80 years, there is no income for the rest of the life. Therefore, we need to create a sufficient retirement corpus to last for these 20-25 years to live a stress-free retirement life and make the most out of it.
In today’s article, we’re sharing seven important reasons why taking the reins today can lead to a more fruitful financial future.
Importance of Retirement Planning in India:
1. Rising Healthcare Expenses:
With growing age, medical expenses usually account for the largest chunk of your total expenses. And this cost is sky-rocketing. The average medical inflation in India is around 12-14%, which is almost double the economic inflation in the country.
2. Protects Post-retirement Lifestyle:
Do you want to live a happy and peaceful life after your retirement – a phase when your monthly income is no longer coming into your account? The key to having a happy life post-retirement is to start investing as early as you can and have a retirement corpus in mind. You need to plan for a target retirement corpus that shall meet all your financial needs and goals in the future so that you don’t compromise on your lifestyle or quality of life at any stage.
3. Rising Inflation:
The estimated retail price inflation in India is 5.4% for 2023-24. This implies that a meal that costs you Rs 100 today, will cost you Rs 105.4 next year.
4. Increasing Standard of Living:
We all follow a certain lifestyle and with age, it gets deeply incorporated into our daily habits. The lifestyle we lead today is because of the income we receive every month. To ensure this same standard of living post-retirement, investing in a retirement plan is necessary. That will help you with a steady income every month even after retiring.
5. Increasing Life Expectancy:
Life expectancy in India is increasing every year with advancements in healthcare. Longer life means you’ll need more retirement funds saved to continue to live off. That means saving more and planning for longer. The earlier you begin, the better your chances are of having enough retirement funds to last your entire lifespan.
6. No Social Security System:
India does not have a social security system like developed countries where the elderly is taken care of by the government.
7. Zero Family Burden:
During your retirement, you shouldn’t be dependent on anyone, especially your own relatives. Having a good retirement plan will ensure that you don’t convert into a financial burden for your loved ones. If you’ve planned consciously and kept a healthy amount invested for retirement, you may have a lovely gift to give your children by adding to their wedding plans or grandchildren for their education, gifts, etc., when your time comes.
How to calculate your retirement corpus?
The first step toward best retirement planning is determining the corpus you’d require and then working backward. There is no sure-shot formula for arriving at the right corpus needed for a comfortable retired life. However, there are a few essential factors that a retirement calculator in India takes into consideration to arrive at a sum.
Use Net Brokers Retirement Planning Calculator to find out the amount of monthly SIP required to reach your desired retirement corpus, calculated based on your current monthly expenses adjusted for inflation. Let’s understand how the retirement calculator works:
Assume Ms. Ranbir, who is currently 35 years has plans to retire at 60 years of age. Currently, Ranbir’s monthly expenses are Rs 1,00,000 out of his total monthly income of Rs 2,00,000. He wants to prepare and plan for his retirement as early as possible to reap the benefits of compounding. So, he enters the following details in the Net Brokers retirement calculator to know the required monthly SIPs that he should start to accumulate the desired retirement corpus to lead a comfortable post-retirement life.
After filling in the required details, the retirement calculator will give you the estimate of the required retirement corpus to finance your monthly household expenses after retirement & the amount of additional monthly investments (adjusted for savings) needed to accumulate the same.
In this instance, Mr. Ranbir finds out that he requires a total retirement corpus of Rs 13.0cr to meet his post-retirement monthly expenses of Rs 5,42,743 based on his current expenses & expected inflation rate. And to accumulate Rs 13.0cr of retirement corpus, he needs to make a monthly investment of Rs 76,523 via SIPs for the next 25 years in equity mutual funds to lead a secured and comfortable retirement life.
Download Net Brokers smart mutual funds app today and calculate the right amount that you need to start investing today to help secure your retirement!
Net Brokers Takeaways:
- Never withdraw funds from your retirement corpus, before you have retired, irrespective of the financial emergency as you cannot avail of any loan from any source to fund your retirement life.
- Review & adjust your investment portfolio regularly to earn maximum returns.
- Have different plans for different goals such as retirement, child’s marriage, child’s education, etc. Never use funds that are intended for some specific purpose, when you need money.
- Start your retirement planning as early as possible via monthly SIPs in equity mutual funds. Starting retirement planning early gives you an edge as with a longer investment horizon, the compound interest in your investments increases exponentially. This is the power of compounding. Equity mutual funds give returns that beat inflation over the long term and can help you accumulate a substantial enough retirement corpus to fulfil your retirement dreams.
- Invest regularly & increase your investments every year with rising income via SIP top-ups.
As George Foreman rightly said, “The question isn’t at what age I want to retire, it’s at what income.”
Net Brokers strongly believes that the right financial planning, while working, lays the foundation of your life after retirement. Do not go by hearsay in investing your hard-earned money, and instead, take the help of professionals from the finance field to make prudent & right decisions for yourself.
Get in touch with us today to learn more about how you can successfully plan your retirement.
Download our mutual fund app & start investing for your long-term financial goals.
Happy investing.