How to Optimise your Retirement Planning

Retirement planning is a lifelong process, and should start long before you retire – the sooner, the better. The aim is to ensure a steady stream of income after retirement. It entails setting aside funds and investing specifically with a retirement corpus in mind. Your exact retirement strategy will depend on your goals, income and age.
Jan 2023
4 mins read
People have all kinds of retirement goals. Some want to return to their hometowns. Others want to spend time with their family. Many are eager to start a new business or switch to an alternative career. Still others want to travel or pursue a hobby. If you have a goal in mind but are worried about your savings, it’s time to review your retirement plans.
Remember, retirement can be expensive, especially as medical bills rise. Add to that the burden of inflation, and you might begin to worry about not having enough money for future expenses. The idea of a retirement investment plan is to give you financial stability in your later years, so you won’t have to depend on others.

Four reasons why you MUST have a retirement plan

Lack of a social retirement benefit
Indian companies are yet to implement robust retirement benefit plans for their employees. Although pension and employee provident funds do exist, they may not be sufficient to take care of your personal finances. Hence, it’s important to create a substantial, diversified retirement fund with fixed income and mutual fund investments.

Financial independence
For generations, older Indians have depended on their children for retirement support. But lately, young Indians are leading ever more independent lives. They live away from their parents and might be unable or unwilling to support them financially. This makes it important to have your own arrangements in place. Even if your children can take care of you, it’s always good to be independent enough to live life on your own terms.

Rising costs
As an investor, you will need to account for rising costs due to inflation when planning your retirement. Unless you stay ahead of these costs, you will have little choice but to compromise on your standard of living.

Medical emergencies
Healthcare costs are at the heart of retirement planning. While retail expenses rise steadily, healthcare inflation is growing at an alarming rate. This makes it imperative to set aside enough money to cover healthcare costs in retirement and to ensure you have adequate insurance.

Follow these tips for successful retirement planning

Estimate your expenses
First, you need to assess your current financial situation. Take a close look at your finances, such as income, liabilities, unavoidable expenses and future responsibilities. This will give you a good idea of your spending patterns. Identifying areas that might deplete your money reserves can kickstart your saving and financial planning journey.

● Determine your retirement needs
You should try to estimate how much money you’ll need in retirement, to figure out how much you should save. For this, it’s important to have an idea of your retirement lifestyle and estimate your retirement age and lifespan. While planning for your retirement, make sure to account for factors such as inflation, expected return on investments and income sources. You can use an online retirement planner to help assess your retirement needs.

Use employer-sponsored plans
Your employer may offer work-based pension plans to help you save for retirement. Evaluate these plans and use them to your advantage.

Create an emergency fund
It’s important to save for a rainy day. Create an emergency fund for potential crises, to protect your retirement funds and avoid dipping into your savings.

Don’t neglect health insurance
Many people may not consider health insurance an essential part of retirement planning, but it is indispensable. You cannot predict healthcare inflation in the future, so it’s best to be prepared for adverse health events. This way, you can reserve your contingency fund for other emergencies and reduce unnecessary expenses, allowing you to save more.

Diversify your investment portfolio
Diversify your retirement corpus by investing in mutual funds, fixed income instruments and government-backed securities. This will help you spread out the risk in your investments, thus limiting your potential losses and optimising your returns for retirement planning.

Plan for tax efficiency
Your retirement fund accounts will qualify for tax payments, so factor that in and make sure to invest in tax-saving plans for retirement planning. This will ensure you don’t lose a sizeable portion of your savings to taxes.

Avoid dipping into your retirement funds
Many people are tempted to prematurely use the money set aside for retirement – but it’s a mistake. You should refrain from using your retirement fund for your child’s education or marriage or any other purpose. Instead, try to separately plan out these life goals and allocate an amount for each of them. This way, each financial goal will have its own corpus and your retirement fund will be safe.

Track and review your plan regularly
Monitor your retirement plan at regular intervals and make sure you are on the right track to meet your objectives. Changes in your income, expenses, retirement age etc. should be incorporated into your retirement plan. You must make sure your retirement plan meets your investment objectives in a changing market scenario.

Retirement planning never stops, and it’s important to update your plan regularly and make adjustments as and when needed. Follow these handy tips and consult your financial advisor to make the most of your retirement planning.
PGIM India Asset Management Private Limited
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