Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, estimating expenses, implementing a savings program and managing assets. Future cash flows are estimated to determine if the retirement income goal will be achieved.
Remember that retirement planning starts long before you retire - the sooner, the better. Your “magic number,” the amount you need to retire comfortably, is highly personalized, but there are numerous rules of thumb that can give you an idea of how much to save.
Whatever method you, and possibly a financial planner, use to calculate your retirement savings needs, start as early as you can.
When should start saving for retirement?
The answer is simple: as soon as you can. Ideally, you'd start saving in your 20s, when you first leave school and begin earning paychecks. That's because the sooner you begin saving, the more time your money has to grow. Each year's gains can generate their own gains the next year - a powerful wealth-building phenomenon known as compounding.
Where to save retirement money?
There any many options available in the market, the different types of plans have different features, most of them also allow you to defer taxes on the money you save and the returns you earn within the account.
"Tax deferral" means that the amount you contribute escapes the usual income taxes until you start withdrawing the money years later. As a result, more of your money can earn investment returns over time - an enormous advantage over ordinary taxable accounts.
How to invest money?
To build a nest egg large enough to see you through retirement, which may last 30 years or more, you'll need the growth that stocks provide.
Identify your goals : One should first list out their goals. This will help them you to decide on mutual fund investments. Also, you will know how much you need to invest to achieve each goal.
If a person is investing to achieve a short-term goal that needs to be achieved in a couple of years, the person should invest in debt schemes. When you have a short-term goal, you should not expose your investments to unnecessary risk. You don’t have time in hand if something goes wrong.
However, if you have a financial goal that needs to be met after five years or so, you can bet on equity mutual fund schemes to achieve them. Equity is considered ideal to meet long term goals because it has the potential to offer superior returns than other asset classes over a long period.
There are a plethora of schemes within the debt and equity mutual fund universe. How would you choose the right mutual fund scheme? Simply put, you should choose a scheme that is in line with your goal, investment horizon and risk profile.
How much money will I need in retirement?
The Retirement Planner will help you understand how much you need to grow your wealth before you retire and how to plan for it.