RETIREMENT PLANNING: CHOOSE YOUR METRICS WISELY
Retirement can be scary for a lot of people. Retirement represents an end to golden years of earning income. It’s often denoted as a life of uncertainty without the cushy private or corporate job, regular income, and other perks. On the other hand, some people can’t wait for their retirement period. For them, retirement is the freedom to do whatever they want to do, rather than having to do it.
Not all people recognise the importance of retirement planning. Your retirement planning shouldn’t be a guessing game. To better quantify preparedness for their retirement, savers can use a few rules of thumb calculations to aid them to estimate whether they would have sufficient money to afford their desired lifestyle. While retirement planning should not ideally rely on just one single rule of thumb, comparing them to a set of established metrics can help you determine your ability to retire comfortably.
Metrics to help you with the process of retirement planning
- Calculate your retirement period: It isnecessary to distinguish your “retirement phase” or the number of years you plan to spend in your retirement, for you to understand when to begin planning, the minimum corpus needed for comfortable post-retirement life, and how many years you have to build your wealth. For instance, if you desire to retire early, the corpus required would be significantly larger than when you plan to retire at the conventional age of 60-65. Miscalculating your retirement phase can create the risk of running out of – corpus, which interestingly also happens to be one of the biggest worries retirees face every year.
- Don’t forget the cost of delay: The best time to begin saving for retirement isn’t when you are about to retire in a while, but when you receive your first paycheck. Remember, retirement planning is a lengthy process, and you just can’t achieve it in a matter of a few years. You need to diligently allocate a part of your salary regularly to ensure a comfortable retirement.
- Try to make your nest egg as comfortable as possible:You should not be stressed during your retirement life, your life before retirement would have given you plenty of that! It’s important to accumulate sufficient to go through your retirement phase comfortably, and it is always better to collect a tad more rather than accumulating a tad less.
- Remember expenses rise and hence factor inflation: The impact of inflation is huge and often hard to sink in. It adds to the cost of living every year, and by the time we hit retirement, we would have to spend much, much more than we do todayto maintain the current lifestyle. Additional costs like health-related expenses also creep in with age.
- Don’t forget about asset allocation: Asset allocation is often missed out while planning for retirement. What is the right mix for your portfolio? It solely depends on when you start. For those who have more than 20 years to retire, the equity should ideally be a large part of your portfolio.
There are different types of mutual funds available to individuals. Invest in mutual funds that best suit your retirement portfolio. Work hard and save harder so you can enjoy your retirement, as it’s meant to be. Happy investing!