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What is retirement planning?

You would have to choose investments to reach your retirement goal based on how much money you would require after retirement.

The major factor in setting up a retirement goal is at what age you want to retire .Earlier you want to retire, more is the importance you need to give to your retirement planning.

Take up investments to match your retirement goals based on the risk you are willing to take. If you are a conservative investor invest in risk free securities. If you are an aggressive investor, invest in securities which give higher return at higher risk.

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Why Retirement Planning

Live an Independent Life

Your children would provide you money for a retired life. But is it right for you to depend on them?

Retire Early

You can retire early with excellent retirement planning. You will have plenty of time to catch on your hobbies and other interests.

Money for Retirement

You get no income after retirement. You have to plan for your retired years now, if you want to enjoy the same lifestyle you currently enjoy.

Tax Benefits

You get tax benefits if you invest your money in a pension plan or an annuity scheme. This helps to save on tax.

Key factors to consider for Retirement Planning

How to do your retirement planning?

Retirement planning is done based on age.
Retirement planning is done keeping inflation in mind.
Retirement planning if done well should help you lead the same lifestyle after retirement, that you lead now.

Steps in retirement planning

Your current age and when you plan to retire is very important in retirement planning.
Know your current expenses. Higher they are, more is the money you require at retirement.
Keep inflation (General rise in prices of goods or services with time), in mind when you do retirement planning.
Calculate how much you would require after retirement to maintain the same kind of lifestyle you enjoy now.
You have to estimate how long you would live after your retirement. If you were to live up to 80 years (20 years beyond your retirement age of 60 years) you would have to plan for these years.

Concepts & FAQ's Retirement/Pension Plans

What is Retirement Planning?

Retirement Planning is the process of planning for financially independent life after an individual retires from work.

One of the stages of life which requires careful planning is retired life. In fact, achieving what is anticipated in retired life is the most difficult part of financial planning in today's scenario. One can even decide on when one wants to retire is careful financial planning is done.

Objectives of Retirement planning

Maintaining pre-retirement style of living
Financial independence
Minimizing Taxes
Early Retirement
Wealth Transfer
Improved standard of living in retirement

Types of retirement plans :

1. Defined benefit plans
It is a kind of plan which specifies the benefits each employee receives at retirement. In most of the plans the benefit is stated as a percentage of pre-retirement salary, which is payable for the remaining life as a regular payment or a lump sum on the date of retirement.

2. Defined contribution plans
It is also known as money purchase plans. Retirement benefit plans can be structured in such a way that, some part of salary can be set aside every month /year either by the employer alone or by the employer and employee together or by employee alone.

3. Hybrid (Defined Benefit + Defined Contribution) plans
In addition to the above two stated plans there is a third plan too which is combination of both of them and is very rare in nature. In such plans, both the ends i.e. the rate or the amount of contribution to be made to the beneficiary is fixed.

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Frequently Asked Questions

When should I start planning for retirement?

It is advisable to plan for your retirement once you start earning. But, the ideal age to start for your retirement planning is around 35-40 years.

How Much Should I Save for Retirement?

It depends on your way of living and other costs like: cost of living, proposed life expectancy, Medical bills, Health needs, Travel expenses etc. One needs to consider inflation and other economic aspects also before arriving at a particular figure.

Does everyone need a retirement plan?

Absolutely - regardless of someone's personal savings or income levels, it is important to start with a retirement plan. A plan allows you to take action now, which can mean the ability to accumulate more retirement income in the future.

What are some of the common mistakes one makes while planning his retirement?

Miscalculating his retirement age
Miscalculating his day to day expenses
Not taking inflation into consideration
Overburdening oneself with debt.

Is inflation an important aspect while making a retirement plan?

Absolutely, inflation is an important aspect which is to be considered as the value of money changes over time.

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Retirement/Pension Plans Articles

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Retirement/Pension Plans News

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EPFO may allow tweak in equity investments

Wednesday, June 20, 2018, 10:13 AM

Employees' Provident Fund Organisation (EPFO) subscribers may soon get the option to invest more of their retirement contribution in stocks to potentially earn higher returns, a senior labor ministry official said. The labor ministry is likely to introduce a proposal to increase the stipulated equity investment limit of 15% at the next central board of trustees (CBT) meeting on June 26.

Atal Pension Yojana Limit Could Be Increased To Rs 10,000

Tuesday, June 12, 2018, 4:35 PM

Thinking of investing in Atal Pension Yojana (APY)? There is some good news for you. The government is considering a proposal to raise the pension limit under Atal Pension Yojana (APY) to up to Rs.10,000 per month from the existing slab of up to Rs.5,000, news agency Press Trust of India reported, citing a top government official. APY focused on the unorganised sector.

Man seeking pension brings snake to office

Friday, June 8, 2018, 4:08 PM

A leprosy patient, who was not getting pension for the past eight months, protested in a unique way. On Thursday, he caught a snake and reached the office having garlanded himself with the cobra, threatening the staff, with "give pension or face the action" after his repeated requests failed to bring results. Frightened by this, the staff ran away.

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Retirement/Pension Plans Education

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#6. Immediate annuities

Tuesday, April 10, 2018, 6:25 AM

Retirees could also consider the immediate annuity schemes of life-insurance-companies. The annuity is currently around 5-6% per annum and is entirely taxable. There are about 7-10 different pension options, including pension for a lifetime for self, after death to spouse and post that the return of corpus to heirs. The immediate annuity may not suit an investor who is capable of selecting and building his own portfolio.

#5. Tax-free Bonds

Tuesday, April 10, 2018, 6:19 AM

Tax-free bonds, although not currently available in the primary market, can also feature in a retiree's portfolio. They are long-term investments and mature after 10, 15, 20 years. Invest in them only if you are sure that you will not require the funds for such a long period. The interest is tax-free therefore there is no Tax Deducted at Source (TDS).

#4. Mutual funds (MFs)

Tuesday, April 10, 2018, 6:15 AM

When one-retires and there is a likelihood of the non-earning period extending for another two-decades or more, then investing a portion of the retirement-funds in equity-backed products assumes importance. Debt-MFs can also be a part of a retiree's portfolio. Retirees would be advised to stay away from thematic and sectoral funds, including mid and small-caps. Income from debt-funds gets taxed at 20% after indexation.