Is there any ideal age to retire? Or precisely, how much should an individual save before he/she retires? These are the few most common questions that come to our mind when we hear the term “retirement or retirement plan.”
Rather than focusing on these questions, one should ask what the standard of life they want post-retirement is. Is it better and more lavish than the one in the pre-retirement period? If yes, then you need to save more than you earn in your pre-retirement period. Hence, knowing your retirement needs is the foremost important step.
Some financial planners according to the traditional methods suggest that saving 70-80% of your pre-retirement income would be sufficient for you. But with changing times new methods have been adopted which clearly revolve around the lifestyle you want to lead in your post-retirement journey. There isn’t any universally correct answer for this. Even your current financial status plays a vital role in designing your ideal plan.
For someone who does not have any finance-related background, can hire a professional who could analyze your current holdings and can help you fill the gap between your needs and current investments by savings. There are various retirement plans or accounts available. Retirement accounts such as 401(k) plans or individual retirement accounts (IRAs) even provide tax benefits. One can even opt for index funds which are highly in demand in the market nowadays due to their returns. Retirement accounts do have a downside, they are not free. If not planned and executed properly, the fees one pays can outrun savings. Therefore, understanding your retirement plans and investing options thoroughly is a must.
It is never too early to save or start investing. People tend to opt for high-risk and high-yielding return investments in their early ages like share markets and they tend to go for safer investment options once they are near retirement like certificates of deposit, government securities, etc. Regardless of the risk tolerance, returns are what one looks for in the end. Hence, saving and investing is the key to ace your post-retirement journey. One needs to have a realistic expectation bar set for retirement around which one can design a plan by researching or by hiring some professionals for the same. Better yet, start thinking about those questions decades before retirement. “Retirement savings are like a personal pension plan. The more you invest, the more secure your future becomes”
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ABOUT THE AUTHOR
Diya Pareek is a third-year student pursuing Bcom Hons from Maitreyi College, University of Delhi. She is a finance enthusiast exploring various fields of economics and finance. I hope you like my insights on the Retirement Planning.
Informative 👍🏻👏🏻