Skip to main content

To Retire rich Start saving and Investing early in life

 

THOSE of us who still have many years to go before retiring tend to think of retirement in terms of fuzzy clichés like tending to the roses, long walks by the sea, playing golf on weekdays, pottering around the house and so on. But those staring retirement in the face, invariably, think of grimmer things like steep medical costs, shrivelling income stream, taxes, inflation and the rising cost of living, and of whether their savings can meet all these expenses. When it comes to planning retirement, the bottom line is this: You either are in a saving mode or you are in a spending mode.

The pre-retirement phase of life includes many financial responsibilities and goals, such as building a house or providing for children's education, besides planning your own retirement. Yet, many of us remember retirement just a few years ahead of the `Rday'. Arriving at how much retirement savings you should have is a tough one, but one can fairly estimate one's needs depending on the lifestyle one maintains after retirement. It will help to prepare a budget that lists what you spend on necessities so that you know how much your monthly or annual expenditure will be in the future. Account for inflation keeping a rough estimate of 7-8 per cent inflation every year. Also, consider expenses that are bound to increase, such as medical and transport expenses. Then again, calculate the expenses that may cease to exist, such as your children's education or repayment on a home loan.

The accumulation phase, where you can save and invest for your golden years can start anytime from the day you start earning and, while, there are many ways that one can save; life insurance is a component that plays an important role.
It is a protection tool that safeguards the interest of your financial dependents in case you die; it also helps you build a cosy retirement egg that you can utilise after your own retirement.

Of course, if you start at a late age, you will have to increase your savings substantially and even cut down on any superfluous expenses. Starting early will help you benefit through the power of compounding, that is, you have more time for your money to grow.

The advantage with life insurance is that it instills a regular savings habit that is systematic with regular payments towards premiums and offers tax benefits on savings, as well as withdrawal on maturity. There is also professional money management that insurance products offer, which is far better than handling it ourselves.

As you approach retirement, you need to assess how long your savings can last in retirement and lead your retired life.


With increasing life expectancy, we are facing a situation where our years in re tirement can be as long as or more than our working years, depending on when one retires.

Reality is that once retirement is reached, the saving period is over. The balancing act at this point is between the desire to enjoy retirement and the fear of running out of money prematurely.

The way the retirement life insurance plans are structured; you get a tax-free lumpsum to withdraw from your accumulated savings with the balance paid as a monthly annuity acting as a regular income stream. But there are ways to supplement this income stream; one can consider working beyond retirement, which could be part time, or, in the immediate future make illiquid assets pay better.

Research indicates that a majority of Indians owning a house much before they retire, the reverse mortgage facility makes the house that one owns, pay a regular income stream for a fixed number of years or through the life of the homeowner.

One can tactfully opt for an insurance policy in retirement that will swap the value of the house on the reverse mortgage option on the insured's death, with the house ownership being bequeathed to the insured's family. This way not only can one earn income from one's house; one can also pass the house to the next generation.

At the end of the day, retirement is a journey and what matters is that you get to your destination with a clear road map and make sure you enjoy the journey.
 

Popular posts from this blog

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...
Read more

Term insurance

Term insurance may not be the most-marketed product by life cos, but it’s a must-have in today’s risk-prone lifestyle WHEN was the last time your insurance agent sold a term plan to you? It’s not a very popular policy among agents, as their commission in absolute terms is low because of the low-premium. Just as agents have their self interests in mind while selling, you need to make your own decision about your insurance needs, which are unique to your family. COST ADVANTAGE A term plan is pure protection. It is the cheapest type of life insurance policy. But what you see might not be what you get, most insurers have a range of health parameters for standard rates. If any of your health parameters — weight, blood pressure for instance fall outside this range, you will pay more. For some companies, the standard range is very narrow. EARLY BIRD GAINS A 30-year-old will pay 15% more premium than a 25-year-old. At 40, the premium is double of what is applicable for a 25-year old, points...
Read more

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...
Read more

More on Mutual Funds

What Is a Mutual Fund ? A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Anybody with an investable surplus of as little as a few thousand rupees can invest in Mutual Funds. These investors buy units of a particular Mutual Fund scheme that has a defined investment objective and strategy The money thus collected is then invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments, depending upon the scheme's stated objectives. The income earned through these investments and the capital appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.   What Are The Types of Mutual Fund Scheme...
Read more

Good time to invest in Infrastructure Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Good time to invest in infrastructure The Sensex has gained almost 10 per cent from May 15 till date, while the CNX Infrastructure Index has gained almost 17 per cent in the period. The price to earnings ( P/ E) ratio of the BSE Sensex is 18.96; for the CNX Infrastructure Index, it is 24.57. The estimated P/ E for next year is 14.04 for the Sensex. Of the 24 companies that make up the CNX Infrastructure Index, six have a P/ E higher than 20. Does this mean infrastructure is fairly valued? Or, has it run up quite a bit? According to experts, barring stray companies, the infra sector is fairly valued and it is a good time to invest. Even if some companies are facing debt restructuring problems, once interest rates come down and regulatory norms become flexible, they will start giving good re...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now