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Retirement

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What is "Retirement"?

Retirement is a time when one stops working after attaining a certain age in life. Generally the retirement age for people working in companies is 60 yrs.

5 reasons why one plan for their retirement -

  • Life Expectancy is Rising
  • No good Social Welfare by Govt
  • High Healthcare costs in old age
  • Depending on your children is unfair
  • Best time to fulfill lifelong aspirations

4 Reasons why investors don't plan for their retirement

Reason #1 - It is a " SELFISH GOAL "

Many people think that planning for life after retirement is a selfish goal. People feel that they will be compromising on other aspects of life.

Reason #2 - It is a " TOO EARLY TO PLAN "

General perception of people regarding their retirement planning is that they think it is too early for them to plan. They want to plan for their retirement only after they are fulfilling other responsibilities in life such as children education, children marriage, buying a dream home etc....

Reason #3 - They are not able to "VISUALIZE" the retirement goal

We all are very bad at predicting how our lives will turn out to be after 10 or 20 yrs old.It is tough to predict how good or bad the future will be. This is the reason why people are unable to visualize it

Reason #4 - Not able to "SAVE" enough

People cannot save for retirement because they just don’t have any surplus left at the end of month. Incomes are not increasing, while expenses are growing like amoeba in all directions. It’s getting tough to save in today’s times especially if you are single earning member in family with 5-6 people in a big city.

 

What are the most recommended investment option for retirement?

The most recommended investment options for retirement are as follows -

a) Senior Citizen Saving Schemes (SCSS) -

SCSS is a savings scheme for a senior citizen who falls under the age group of 60 years and above. Those senior citizens who are at the age of 55 years or more but less than 60 years (who have retired on superannuation or under VRS) can also avail of this scheme, within one month of receipt of retirement benefits and the amount should not exceed the number of retirement benefits.

The senior citizen can visit the nearest post office to avail of this scheme. A joint account can be opened with a spouse or husband only( with the first depositor as the investor). The account can be transferred from one post office to another

b) Mutual Funds -

Mutual funds are the best investment option which can help us in fulfilling our financial goals. If it is planned with the correct strategy then, one can generate good corpus through this. If one is investing in mutual fund for a longer period of term then one can clearly see the visibility of compounding in their portfolio of mutual fund. If one is planning to invest in mutual funds for retirement purpose, then investing in equity mutual funds is a good option and when one is about to attain the age of retirement then one can switch to debt mutual funds if they don't want there portfolio to be exposed to high risk. while nearing the retirement age, one can switch to debt funds.

c) Public Provident Fund (PPF) -

PPF is a long-term investment option of 15 years by the Government of India with an attractive interest rate of 8%(with returns fully exempted from Tax). One can invest minimum Rs. 500 to a maximum of Rs. 1,50,000 in one financial year. Deposits can be done in a maximum of 12 transactions only. One can also enjoy loans, withdrawals, and extension of the account. Loans can be taken against the Public Provident Fund between 3rd to the 6th financial year. A partial withdrawal facility can be taken from the 7th financial year onwards. The account can be extended for a period of 5 years after maturity but in a block-in mode.

d) National Pension System (NPS) -

The NPS is a pension scheme by the Indian Government which allows the unorganized sector and working professionals to have a pension after retirement. This can be opened by any Indian citizen aged between 18 and 60. No limit on maximum contribution. Investments of up to Rs. 50,000 can be used to avail tax deductions under Section 80CCD. This limit of 80CCD is deductible over and above the maximum limit of section 80C (Rs.1.5lacs).

e) Employee provident Fund (EPF) -

EPF is a retirement scheme which is available to all salaried employees. 12% of basic salary + DA, is deducted by an employer and deposited in the EPF or other recognized provident funds. Any employee with a basic salary of 15000 per month can open the EPF account. The basic requirement of this scheme is that both the employer and employee will have to contribute a minimum of 12% basic pay+D.A. The entire PF balance with interest is tax-free if it is withdrawn after 5 years of continuous service.

Benefits of using "Retirement Calculator" -

There are various benefits of using retirement calculator. Let us see few of them one by one -

i) Retirement Planning -

This calculator will help you to easily plan for a life after you retire from your job. After retiring from our job many of us has some aspirations as to what we want to do after retirement. Some want to travel the world, some want to follow their passion. To fulfill these desires, one needs to have a good corpus. Thus, this calculator will help us in planning how much money will be needed to achieve these financial goals post-retirement.

ii) Gives a clear picture of Future Corpus -

This calculator gives a clear picture of how much we need to invest monthly for meeting our post-retirement goals and how much corpus will be accumulated in future.

 

Why should we plan for our retirement?

We should plan for our life after we retire because even after we retire we have expenses to cater to. Our retirement doesn't guarantee that our expenses will not be there. it is very essential to keep a corpus ready. As we are ageing we might have some major medical expenses, and if we do not have money then what will we do? As we have retired no one will be giving us loan since we do not have the capacity to pay off the loan.