What is retirement planning? – The economic context


I believe that while people are busy planning their children’s future such as their education, marriage, lavish lifestyle, overseas trips, etc., they simply ignore their own family planning. retirement.

Retirement is that stage of life where people have time to pursue all those hobbies and dreams that they were unable to pursue during their young age due to time constraints. However, it is essential that people realize that there will be no regular income to meet their basic needs after retirement.

Why is retirement planning so important?

  1. In the old days, people lived in a joint family, so even after retirement, it was easy to bear household expenses as it was considered the responsibility of younger family members to bear the expenses of their elders. But nowadays, nuclear families are more popular and if we don’t plan properly, then it becomes very difficult to meet even the basic needs after retirement.
  2. Previously, the average age of a person was 60-65 years old, today it has risen to 70-75 years old. (Date source: United Nations-World Population Prospects) So, if a person does not plan their retirement properly, the expenses incurred to live longer after retirement will be hard to bear.
  3. As we know that inflation is increasing day by day, the effect of inflation, which seems low in the short term, may be higher in the long term. This means that an individual will have to pay more for all expenses in the future. So, while doing vital retirement planning, you can consider this determinant and generate enough retirement fund for your future to live a peaceful life.
  4. No one can predict the future, in such situations it is best to be prepared in advance and retirement plans are the best way to secure the future for financial needs. A retirement plan can help ensure that you are not financially dependent on someone else in the event of a medical emergency or any other emergency.
  5. Until a few years ago, interest rates for investments were also high, thanks to which, after retirement, people could meet their financial needs through interest income, which is perhaps not the case. not be possible today due to low interest rates on financial instruments. This makes it all the more important to invest in a good retirement plan at a young age.

I want to explain with an example why timely retirement planning is important.

If a person is 35 and their retirement age is 60, their income age is 25 and we also assume here that their life expectancy after retirement is 75, then they have 15 years left after his retirement to live.

Suppose if that person’s expenses today are Rs. 30,000 per month, then after 25 years from today, the person will need around Rs. 1,02,000 to meet the same expenses (at the assumed inflation rate of 5%). He will need about Rs. assumed inflation is 5%). If he invests to create this retirement corpus today, then he would have to invest around Rs 18,600 every month (at an assumed annual interest rate of 8%).

But if he does not invest from today and starts investing to build this retirement wealth even after 5 years from today, then he will need around Rs 30,000 per month at instead of Rs 18,600

Note: The illustration above is for educational purposes only and is not an attempt to predict the same.
Using this example, I am trying to explain to you that if a person delays retirement planning, they will need more money to accumulate the same amount of money.

In summary, planning for retirement is as important as other financial goals because it helps ensure a happy life after retirement. If you don’t plan your life after retirement properly, you may not be able to rectify that mistake after retirement.

Opinions are personal: the author – Manish Maheshwari from निवेश मित्र™ is MFD a Distributor of Mutual Funds

Disclaimer: Opinions expressed are those of the author and are personal. TAMPL may or may not subscribe to the same. The opinions expressed in this article/video in no way attempt to predict or time the markets. The opinions expressed are for informational purposes only and do not constitute investment, legal or tax advice. Any action taken by you based on the information contained herein is your sole responsibility and Tata Asset Management will not be liable in any way for the consequences of any such action taken by you. There is no guaranteed or assured return in any of the Tata Mutual Fund schemes.

Investments in mutual funds are subject to market risk, read all plan documents carefully.

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