Preparing for Retirement? A Guide to the Top 5 Investment Tips for Securing Your Future

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Achieving financial stability post-retirement is a common goal. A well-planned retirement investment is crucial for achieving financial freedom in an individual’s golden years. It is a vital step to save enough for old age. A superannuation plan is designed to cater to a retired individual's financial needs during retirement, including medical expenses, living costs, household expenditures, etc.

The best trick is to start investing early and accumulate a sufficient sum to safeguard the retirement life. When selecting the best retirement investment plan, it must shape a person’s hard-earned earnings into savings for retirement. Multiple options offer different types of interest rates, benefits, and returns. An individual may choose one according to their financial requirements and risk appetite.

Significance of Retirement Planning

Investing in the right retirement plan helps an individual survive on the accumulated corpus post-retirement. However, not planning retirement properly may make life difficult and cause them to depend on others for regular expenses. Hence, identifying the right retirement investment plan is essential to living the retirement life safely and confidently.

Types of Retirement Plans

Indian citizens can invest in various retirement plans to ensure a steady income stream to maintain their lifestyle after retirement. Most popular retirement plans include the following:

●        Immediate Annuity Plans: These plans help retired individuals receive regular monthly payments. They require the individual to make a single investment in an annuity, and the payout begins in a year. These retirement options are particularly useful for those nearing their retirement.

●        Deferred Annuity Plans: In these plans, the investors decide the duration of receiving annuity payouts and make small payments for a period to create a retirement corpus.

●        Senior Citizen Savings Scheme: It is a government-backed scheme offering regular income to retired individuals. People above 60 can avail of this plan and receive an interest rate on their investment.

●        National Pension System: Individuals between 18 and 70 years can obtain a lump sum and a monthly income after that under the scheme. With the scheme, NPS subscribers also receive tax benefits of up to Rs. 2 Lakh in a financial year.

Benefits of Retirement Planning

Let’s look into the advantages of retirement planning and online account opening.

●        Financial Freedom: Those who earn a regular income for life feel uncomfortable when their income stops and they have to depend on others during their retirement years. Investment in a retirement plan lets them enjoy regular payouts and helps them achieve goals they neglected all their life.

●        Life Expectancy: 70-75 years is the average life expectancy today. That means an individual still has many years to survive post-retirement. That is where a comprehensive retirement investment plan helps. To build a sufficient corpus, one must start investing as early as the 20s or 30s.

●        Medical Costs: Health risks are bound to increase in old age. Although health insurance can help tide over medical emergencies, it’s also important to factor in the medical expenses after retirement.

●        Tax Benefits: Investing in a suitable retirement plan maximises savings and reduces tax liabilities. Explore the tax-saving superannuation options in India and invest accordingly.

●        Peace of Mind: Money management often becomes challenging during old age, especially regarding short- and long-term needs. Health issues often crop up during old age, hurting the individual’s pocket. Retirement investment planning allows them to stay healthy and happy without financial stress.

Investment Tips for Retirement Planning

These tips will help you start retirement planning and achieve financial goals:

  1. Start Saving Early: Regarding retirement planning, the earlier a person starts, the better.  The benefits of compounding interest also work better if a person stays invested in a plan for longer. So, starting investment in the 20s or 30s will help an individual enjoy retirement with financial security.

  2. Prepare for Financial Emergencies: One must consider financial emergencies arising in the future when planning for retirement. For instance, purchasing health insurance and building a contingency fund are good ways to cover medical costs and other emergencies. They also maintain financial freedom after retirement.

  3. Get Life Insurance: Almost all good retirement plans also include life insurance. Getting a term insurance plan is another effective method to secure a financial future and prepare the retired individual's spouse for old age and other financial goals. One must evaluate the available options to find an insurance plan that offers sufficient support to their loved ones.

  4. Diversify the Investment Portfolio: When it comes to financial planning for the future, one must avoid putting all their eggs in one basket. Various ways exist to diversify investments and ensure good returns over the years. Proper investment diversification allows risk to be reduced by investing in multiple plans. One must evaluate the available retirement plans and investment options to pick one that best suits their risk appetite and financial goals.

  5. Consider Retirement Goals: Before investing in a retirement plan, one must evaluate how much they need to achieve their post-retirement goals. Considering the future travelling and learning costs is essential. Listing the goals and carefully measuring the associated expenses is instrumental. Once the person understands how much they need, they can choose a plan that helps them achieve their targets.

Factors to Consider When Planning Retirement

Since various retirement plans cater to individuals based on their goals, age, investment horizon, and lifestyle, here are some factors to keep in mind before proceeding with the online account opening process:

●        Expected age of retirement

●        Investment horizon

●        Risk appetite

●        Current financial situation

●        Retirement needs and expenses

●        Asset allocation plan

Retirement planning is setting aside funds and assets for retirement so that a person leads a comfortable and financially independent life even after their regular income stops. In a nutshell, it is a unique savings program that manages risks and assets post-retirement. One must use the tips mentioned here to choose an appropriate superannuation plan to gain financial independence in their golden years.

This article is part of a featured content programme.
Published 06 May 2024, 11:25 IST

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