Money talk: Smart planning for retirement

Retirement planning is not easy. With increasing life expectancy and rising inflation, what you save may always fall short of your needs. Therefore there is a need to plan your retirement savings properly to lead a comfortable post-retirement life. Although it sounds difficult, retirement planning can be made easy with financial discipline and commitment to save from the time you start earning till you retire. Here are some tips to plan smartly for retirement:

Start today:
It is never too late to plan for your retirement. Of course, the earlier you start saving for retirement, the better for your corpus as it can get you the compounding effect. But if you have missed saving in the initial years of your career, you should start now.

Estimate corpus:
An important step in planning for your retirement is to estimate the corpus you would need. Think about your lifestyle and the expenses you would incur post retirement. After this, you should estimate the number of years left for your retirement and the amount you would need to save monthly to reach this corpus. Do not forget to consider the inflation factor, as this can be a big game changer. Also do not forget that health related expenses can increase after the retirement. If you think estimating all this is a challenge, then it is best to consult a financial planner to help you.

Stick to your savings:
The regularity with which you save every month plays a critical step in achieving your corpus. Many people start off enthusiastically, but stop midway or fail to save regularly. You may also be tempted to dip into your retirement pool if there is some big expense which comes up. This can hamper your savings considerably in the long run. In the initial years of your life when your risk appetite and risk tolerance is high, you can start investing in mutual funds for retirement. Starting a systematic investment plan in good quality equity mutual funds can help you achieve your goal with a smaller outlay every month, as equities return more over the long term. As you near retirement, you can gradually shift your retirement savings to safer, debt instruments. You can start this when there are about eight to 10 years left for retirement, in a gradual manner.

Have a health cover:
Many people ignore the importance of a health cover. Having a sufficient health cover can save your money on sudden medical emergencies. After retirement, the health cover which your employer provides you will not be valid. So you should have an adequate secondary cover before your retirement. Taking a new cover after the retirement will be very expensive. The amount of cover to be taken also is debatable. This depends on your family size, the place of residence (treatment in a metro is more expensive than tier 2 cities) and any medical history in the family.

Emergency corpus:
An emergency corpus is a must for people of all ages. When you retire, this becomes critical. So adjust the corpus amount depending on the situation. You should again plan for this contingency fund before you retire itself. Start saving slowly and build a liquid pool, which should be at least six months of expenses. When you are nearing retirement, increase this fund to about 18 months of living expenses.

Try to explore part-time jobs such as a guest lecturer or a freelancer to create another stream of income after retirement.

Save for other goals:
Some goals like children’s education or marriage come at a time when you are nearing retirement. If you have not saved adequately for these goals, it is likely that you will dip into your retirement fund. So chalk out your goals and start saving for these objectives also when you begin working. If you have these savings in place, you need not disturb your retirement savings.

Although retirement planning is generally referred to as saving for retirement, you should also consider the effects of post retirement. When you are retired, your inflows reduce, but your expenses may be high due to medical expenses. So, plan to invest your corpus in instruments which can give you monthly inflows and think of part-time work.

(The writer is the CEO of BankBazaar.com)