Retirement Planning Approaches Towards Well-being
As a teenager you might have thought that life after retirement would be like a calm sea and there would be no struggle. Life is not fairly so simple. In reality, we have too many commitments. Retirement means you’re not retiring from life but you’re retiring from your workplace. You’ll not have your active income; you’ll have to depend on your unearned/passive income. Retirement planning processes involve analyzing your financial situations (now and at retirement) and making suitable provisions so as to fulfill your needs, desires etc during retirement.
The big concern is whether retirement is exciting for a person’s life or not! It depends on your health (both mental and physical), finances, family and society/community etc. Then the next question is how to embrace retirement with healthful habits that can turn your golden years into quality years.
How do you want to spend your retirement days? Just ask to yourself what do you want from your retirement. You’ll be having enough time. What do you need, and just as importantly, what do you want to do during your retirement years? At the end, you want to get peace of mind and relaxation.
You may have the following common concerns:
- Financial security over an undefined period;
- Keeping sound health;
- Recurring costs of maintaining the quality of life;
- Possibility of needing long-term care &
- Unexpected expenses such as major home repairs or other abrupt concerns etc.
It also opens up other questions about how to achieve long-held dreams and goals including how to spend “excellent” retirement life.
Retirement Planning processes enables you to make provisions so as to enjoy your retired life.
Retirement means relief from monotonous life. But the question is how to spend quality of life during post retirement period? We need to think rationally. In general, a person approaching retirement would like to look forward to enjoying hobbies, spending more time with family members particularly with grandchildren etc. But due to changes of economic scenario, the children may not stay with retired parents. They may be settled in other parts of the same country or overseas. Then, hardly a retiree may get chance to spend proper time with children and grandchildren. The situation is quite different today.
Mostly, retirees have financial uncertainties in life and they don’t want to depend on their children. Decades ago, retirees were confident that their children would be taking care of their financial needs. Since the situation is much different today, a qualified Financial Planner has a huge responsibility to mitigate the fear of financial uncertainty and other personal concerns from the minds of retirees.
Approaches in Retirement Planning
A major part of a retiree’s life to be peaceful and relaxing significantly depends on planning. Strategic planning is the process of determining the direction of your life, the goals you have for your retired life and how to achieve what you want. Financial planning involves defining objectives, gathering and analyzing data, implementing the plan keeping in mind the personal aspects and monitoring the results. A strategy to be implemented to achieve the predefined retirement goals involves the following steps:
- Analyzing the availability of retirement benefits from various sources (such as employment benefits plus own contributions like PPF, Pension, FDs etc);
- Income requirement for self along other potential dependents;
- Apprehension of future changes in requirement due to personal and macroeconomic factors;
- Calculation for required retirement corpus including contingency fund during retirement;
- Asset allocation based on your risk profile, investment time horizon, objective, personal and macroeconomic factors;
- Periodical re-balancing of portfolio based on personal & macroeconomic factors.
As Certified Financial Planner in Kolkata, we believe that analyzing the existing retirement plans and improving on them to achieve the predefined goals is important. For example, a self employed person has no employment benefits like PF, Gratuity, Leave encashment salary etc. But he/she can avail direct equity, mutual funds, PPF & FDs etc. for retirement provision. While the purpose of such savings at present may be other than retirement planning like tax saving, they can be used as an effective tool towards achieving corpus required for retirement. A retiree must always be aware of sources of cash inflow (pension, return from investment or both).
Significance and Applicability of Retirement Plan
A comprehensive/detailed financial plan addresses more than one objective. The aim of each action plan for particular objective is to provide satisfaction in life. A financial plan consists of different objectives depending on life cycle stages. Various stages of life require different kinds of planning. Financial planning is subjective. Retirement is one of the most important stages of life. As Financial Advisor in Kolkata, we focus in adopting careful planning tools and techniques. As we mentioned that retirement phase is unlike calm sea. Today, people anticipate a vibrant retirement. Hence, they want to enjoy their lives in full and don’t want to restrict themselves due to financial dependency or penury.
In fact, achieving what is anticipated in retired life is the most difficult part of financial planning in today’s scenario. Difficulties are not for only changing due to social fabrics like disappearing of joint family system but also because of increase in longevity due to advancement of medical science and the capability of treating diseases. Another significant reason is preponement of retirement. Increased longevity has a direct effect on retirement planning. Improved life expectancy means provision for increased retirement period. We, as Financial Consultant in Kolkata, try to reduce assumptions with periodical reviews. Too much of assumptions are not good for one’s life. Assumption means that something may or may not occur. On the other hand, longer educational span reduce the retirement age. Higher the age, lower the productivity and fall of efficiency of a labor. So, one should give a deep thought on his retirement needs and saving capacity.
With time, when these problems have become acute, millennial still don’t perceive the need for starting retirement plan early from their early working phase. Rather, they are too much of obsessed with their current lifestyle, further improvement of quality of lives and current status. The millennial must be aware of unproductive years too i.e. when they’ll become mere consumers in retirement. They are increasing their lifestyle/standard of living but they are hardly caring about their retirement phase.
While you consult your Financial Planner to frame your personal Financial Plan, please note that retirement plan is an integral part of a detailed Financial Plan. As Arijit Sen is a SEBI Registered Investment Advisor in Kolkata, we trust that holistic approach to financial planning must contemplate entire area without any hiatus.
