Retirement Planning

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Planning a retirement solution estimating the corpus is important. Buying an annuity and investing to create a corpus for a regular income in retirement days. Say an example if somebody is getting $10000 a month it ceases after his retirement, so he requires saving in early days and planning for his smoother retirement life. Hence if somebody want to maintain his standard of living post retirement than he has to remember about the income replacement ratio and at what percentage in the earning years. It calculates as Income after retirement divided by income before retirement.

Generally in retirement days due to medical and health related problems expenses and outflows of money is a must but other way no taxes, or children’s study. So ultimately expenses are lesser than working days.

The average life span of a person is 65 in the world but now a day in India due to better medical facilities & treatments it stretches up to 75 years of age. So if a person retires at the age of 58/60 he has to take care of his life’s another 18 year. However managing and maintaining such a long period may be possible if effective financial planning is there.

In the other hand we cannot ignore INFLATION which is beating everything. While go for a financial planning and invest your hard earned money, always keep an eye on Inflation or it may upset you at maturity.

There are non economic objectives like doing something social work or writing, or as per ability, because this is only possible when they have a back up and no worries in mind for instability, as there are challenges after retirement  like some people feels they are no use to the society or they don’t have the creativity as before. But this kind of feelings will never come when he is comfort from the financial front.

What should be your portfolio?

Asset allocation is the most important factor means evaluating from various rage of investments chose your investment objective and which is not so easy.

  • If you have no time for selecting and building your portfolio then go for mutual fund which gives the instant diversification within an asset class.

  • If you are young then star early and invest regularly first it can be in to equity stocks and bonds and maintain the ratio. As you are becoming old your stock and portfolio should be maintain in the same ratio. (like 80:20,70:30,60:40,50:50,40:60,30:70,20:80)

  • It should consist of 5-8 mutual funds systematic investment plans (SIP),equity (Blue chip fund, maintain sectors  as per country specified),Insurance policy like Endowment plans, (avoid ULIPs) Health insurance, Govt. bonds, Public Provident fund, F.D.s, Pension schemes, Senior Citizens Saving Scheme (SCSS),National Savings Certificates (NSC),Savings Account.

  • Keep an eye on income Tax, which can be maintained by above portfolio. Capital gain tax rates may be apply incase of gain or loss, if you sell stocks, bonds or other capital assets.

The amount of investment can be less but in a retirement solution it is necessary to go for all these wide range of investments, in a portfolio to maintain the lifestyle of post retirement.

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