By Mashum Mollah
Happy and stress-free retirement implies different things to different people. For you, it might mean spending more time with your family. Or perhaps you envision yourself traveling through Europe or starting your business.
When you figure out what will give you peace of mind in retirement, it’s important to create a retirement plan to help you get there financially. Therefore, here are few simple steps to help you get started:
Determine the Kind of Lifestyle You Want Later in Life:
You presumably have some idea of how you would like to spend your golden years. So, begin by envisioning what you would like to do and how you would want to lead your life in retirement. Retirement planning can be done by answering some basic yet powerful questions yourself:
- Would you want to travel the world?
- Will you be planning an extravagant wedding for your child?
- Will you buy a second home?
- Will you pursue your hobby which you didn’t have time for?
- Or will you start an entrepreneurial venture?
Understanding these lifestyle preferences and needs will help you estimate your retirement corpus to achieve these goals. This exercise will also help determine how much you will need to live the same lifestyle that you are living now.
Get Rid of Any High-interest Debt You May Have:
You should not retire while carrying high-interest debt. Because those outstanding debts in retirement can point to the potential for problems. Therefore, try to retire as much debt as free as possible. Think about all the interest you could save by paying your debt long before you retire.
Let’s assume you took out a 20-year home loan worthRs. 25 lakhs at 8.75%. Sounds reasonable, correct? However, do you understand how much extra money you will be paying because of that interest? Rs. 28 lakhs! You borrowed Rs. 25 lakhs and will pay back Rs. 53 lakhs, which is not at all smart!
Rather, why not settle your obligations and invest the money instead? That’s what smart individuals do.
Select an Investment Vehicle that Wills Work Best For You:
With goals identified, the next big step is to invest your money in a prudent investment vehicle. However, avoid putting all your money in one place; for example in a single-stock. It is the biggest risk you can take. Because if the stock takes a hit, it may never come back and neither will your hard-earned money. Therefore invest in instruments that provide you with multiple fund options and allow diversification.
With ULIP plans, for instance, you can invest your money in different types of funds- equity, debt, and balanced- as per your risk appetite. Moreover, you can also switch your funds as per the prevailing market conditions or your changing goals.
ULIP funds not only offer you the option of disciplined investment but also provide you with life cover. This ensures that the future goals of your loved ones are financially secured even in your absence. The best part is that reputable insurers like Max Life Insurance offer ample benefits with ULIP plans, including:
- 12 free switches per year
- Partial withdrawal facility
- Tax benefits under Section 80C (on premium paid) and Section 10 (10D) (tax-free maturity benefits)
- Guaranteed loyalty additions starting from 11th policy year and so forth
Simply put, ULIP funds are one of the best retirement plans to help you accumulate the desired corpus and fulfill your goals.
Rebalance Your Portfolio Periodically:
Investing to meet your retirement goals is just half the job done. You also have to monitor and rebalance your portfolio to keep it aligned to your goals. Essentially, rebalancing safeguards you from being overly exposed to undesirable risks. Furthermore, it keeps your retirement portfolio on track towards your goals.
For this purpose, decide the time interval for rebalancing- quarterly, half-yearly, or yearly. Rebalancing will give you the confidence to live the lifestyle that you planned for your retirement.
It’s Never Too Late to Get Started!
Even if your retirement date seems decades away, its imperative to plan now and set realistic goals for your retirement. Regardless of whether you started investing late, or are yet to begin, realize that you are not the only one. Most importantly, there are prudent investments like ULIP plans that can help you accumulate your desired retirement corpus. The sooner you start the planning process, the more likely you are to achieve your retirement dream!
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