How to Plan for Retirement as Per your Age

Everybody has their own financial goals, don’t they? Although some goals may be common for people in different walks of life, no two investors may have the exact same investor profile. For instance, you may want to prioritise building a family home, while another investor may want to first focus on saving up for their child’s education.

However, whether you are in your 20s or your 50s, there is one financial goal that is common across different age groups. And that is the retirement planning. While other goals like buying a home or taking a world tour may depend on the individual’s preferences and needs, retirement is a milestone that everybody experiences.

And yet, not everybody gives retirement planning the importance it deserves.

What is retirement planning?

Retirement planning is a segment of general financial planning. It aims to help you save and invest smartly today, so your future after you have retired is financially stress-free. Today, you may have a steady stream of income to rely on if you are a salaried professional. Alternatively, if you are self-employed, your business entity will be a reliable source of income for you.

However, once you have retired, you will no longer be working. And this effectively cuts off your source of income. Here is where retirement planning can help you. The main purpose of this exercise is to secure the golden years of your life, so you and your spouse can peacefully spend the years after you have retired from the active workforce.

When done right, retirement plans can help you maintain your standard of living and pursue any life goals you may have reserved for this phase of life.

Why is retirement planning important?

Retirement planning is an important part of financial planning for various reasons. Let’s take a closer look at why it is essential to have a solid financial plan in place for your golden years.

• You cannot work forever
  You may be young and in love with your career right now. But let’s face it. It is not possible to continue working way past the regular retirement age. For instance, it may not be practical to work well into your 80s. But if you retire from the active workforce, you will lose your income. Here is where retirement plans in India can help.
  With adequate retirement planning, you will be able to set up an alternate source of passive income to rely on after you’ve retired. You may even be able to have several sources of alternate income, so you can live comfortably without compromising on your standard of living.


• There may be medical emergencies to tackle
  As you grow older, medical issues may be inevitable. Some people may be affected with manageable conditions like diabetes or arthritis, while others may develop critical illnesses that require more extensive treatment. Whatever the case may be, treating or managing any kind of illness can be quite expensive. Without a salary or income to rely on, meeting these needs in your post-retirement life can be tough.
  But when you plan it well, you will have a solid portfolio of an emergency fund, health insurance and life insurance — all of which can help you take care of the expenses associated with medical emergencies easily.


• You may have post-retirement life goals to achieve
  You may also have many specific goals on your wishlist for your golden years. For instance, you may want to remodel your house or build a new floor in your existing home. Or, you may want to start your own business venture. You may even want to travel the world with your spouse.
  The truth is, you require a huge financial corpus to achieve any of these goals. And by planning for your retirement from a much younger age, like your 20s or your 30s, you can save up enough to take care of these goals effortlessly.


• You can be financially independent
  Without a sufficient retirement fund, you may not be able to take care of your everyday financial needs on your own. This will make you financially dependent on your children. However, your children may have their own families to take care of, and this could put undue financial stress on them.
  But if you plan early and correctly, you can have your own money to rely on during this phase of life. This is why retirement planning is important for everybody, irrespective of the job they do or the age group they belong to.

Retirement saving strategies for different age groups

Ideally, you should start saving up for retirement as soon as you earn your first paycheck. However, for many people, this may not be the case. The good news is that no matter what age group you may belong to, there are some savings strategies that you can employ to build your retirement fund.

Saving strategies for young professionals (Age from 20 to mid 30s)

When you have just gotten your first job, you will naturally be inclined towards spending rather than saving. This is understandable, because having a steady stream of your own income can be financially liberating. However, if you want to get a headstart on building your retirement fund, you need to start sooner rather than later.

Here are some savings strategies that can help individuals in their 20s and early 30s.

• Open a separate account to save a portion of your monthly income for your retirement
• Start an SIP to invest in the equity markets via mutual funds
• Build an emergency fund that is equal to at least six months’ worth of income
• Buy a term insurance plan to get the benefit of a significant life cover at affordable premiums

If you have a fair idea of the goals you wish to pursue after you retire, you can use a retirement calculator to compute how much you should start saving during this stage of life.

Saving strategies for mid-career individuals (Age from mid 30s to mid 40s)

By the time you reach your late 30s, you may have a family of your own. Your income may have increased, but so would your debts. This is particularly true if you have availed a home loan or a personal loan for any reason. That said, if you are in this age group and you haven’t started your retirement planning yet, it is better to do so right away. The savings strategies in this life stage may be a bit different, since your risk appetite would have reduced.

Given how you are closer to your retirement age now, here are some savings strategies that can help you during this phase.

• Diversify your portfolio and invest in index funds, debt funds or hybrid funds
• Reduce your portfolio’s overall risk by choosing safer stocks and bonds
• Invest in long-term retirement schemes like the Public Provident Fund or the National Pension System
• Review your insurance coverage and extend it if it is not adequate

Saving strategies for older individuals (Age from mid 40s to 60)

By this stage, you will be much closer to your retirement. You need to slowly shift focus from appreciating your capital to preserving it. The risk in your portfolio also needs to come down, so you need to rebalance your portfolio accordingly. During this phase of life, you also need to pay off most or all of your debts, so you can enter your post-retirement life without any liabilities weighing you down.

Here are some strategies that can help you be better prepared for your golden years.

• Review your retirement fund and use a retirement calculator to check if you need to save up more for your golden years.
• Refrain from taking on new loans and pay off your existing debt.
• Buy an annuity life insurance plan to set up a source of alternate income for your post-retirement life stage.
• Increase your exposure to fixed income investment options.

Conclusion

This sums up how retirement planning can be done across different age groups. So, no matter what phase of life you may be in, it is possible to get started with saving up for your golden years. After all, it is better to start it late, than not start it at all. You can use the strategies outlined above to invest today for a better tomorrow.

That said, although the pointers given above can help, remember to take your financial situation and your post-retirement goals into account, before you draw up a financial plan for this phase of life.