Retirement marks the beginning of a new chapter in everyone’s lives. For some people, retirement is a chance to travel and explore the world. Others use it as an opportunity to spend more time with family and friends. And then there are some who use this opportunity to pursue long-held hobbies or passions. However, without proper planning, retirement could turn into a time of financial insecurity. Thus, planning your retirement wisely can help you live a financially independent life post retirement.
Preparing for retirement doesn’t have to be stressful if you take things one step at a time. On that note, here are 5 crucial steps to help you plan for your retirement strategically and ensure a life of leisure in your golden years.
- Estimate how much to save up for retirement by using a retirement calculator
The amount required post-retirement can vary from individual to individual with factors such as current age, desired retirement age, and monthly/yearly contributions. Tools like a retirement calculator can help crunch the numbers and provide personalised insights on how much you need to save to retire comfortably.
By adding information about your age, income, investment amount and expected returns along with other details, the calculator can give you an estimate how much you need to save to ensure you have adequate funds to live a comfortable retired life.
- Start investing as soon as possible
By starting early and contributing regularly over time, you will be able to build a strong financial foundation for your retirement and reap the benefits of compounding interest. An effective strategy is to invest in mutual funds or retirement savings schemes such as the National Pension System (NPS). These types of investments allow your money to grow over time and have the potential to yield higher returns.
- Broaden your investment horizon
While preparing for retirement, young investors can afford to take some risk with mutual fund investments for better returns. One asset class that could help you achieve this is equity. Equity gives you the potential to earn high returns over the long term. However, equity funds are more volatile than other asset classes, such as debt. Therefore, create a diversified portfolio that includes equity and debt instruments from multiple asset classes, industries, and sectors.
- Create a contingency fund
Unexpected expenses can come up at any time (e.g. medical emergency, vehicle repair etc.). During such times, if you use your retirement fund, it can impact your overall financial strategy. That is why it is important to have a contingency fund in a dedicated account that can cover at least 3-6 months’ worth of living expenses.
- Review your investment portfolio regularly
A well-planned retirement investment strategy is crucial to achieve financial freedom post retirement. Thus, it is recommended to regularly review your holdings and make any necessary adjustments or changes accordingly. This could mean reallocating investments based on market trends, rebalancing your portfolio to maintain an appropriate level of risk, or investing in new assets.
Additionally, you should consult a financial advisor to ensure that your investments align with your overall goals and long-term retirement plans.
Ending note
Preparing for retirement is not difficult, but it requires consistency and discipline. By starting early and being consistent with your savings, investments and strategies, you can ensure that you have enough funds to cover all your expenses after retirement.
0
0
