When Rekha decided to not have a retirement plan due to the real estate assets she had, little did she know that the prices of the real estate industry would stagnate and the rental yields would be so low.

In India, an individual when retiring feels investing in real estate is the best as it gives the best returns and is a security in emergency situations. However, one misses the point that these assets are difficult to sell and often don’t give the money you desire.

We all know the importance of starting early. However, it is important to know the right time and how much you need to retire before planning. In here, we try to answer the common questions about retirement and the tips you should follow to have a proper financial plan.

What is Retirement?

The concept of retirement has entirely changed from what it used to be in the 1980s or 1990s. Earlier, people retired at the age of 60 with a good pension and good health and assumed that their children would take care of them. Moreover, then people used to save in provident funds with a thought of it being enough for their golden years.

Things have changed a lot since then!

People are no longer thinking of retirement as just taking a step back from their professional lives or simply ending a long career. Nowadays, people are thinking of today and fulfil the immediate needs. This is hampering the long-term savings for their comfortable requirement.

According to a survey, 27% of people contributed less to their future planning because of their immediate expenses such as children’s expenses and others. Moreover, there is a myth that since people are earning well, their retirement phase will be comfortable and smooth.

This is where retirement planning plays an important role.

What is Retirement Planning?

We all want a life where we can do what we want when we want. From not working at all to going after your dream career, a proper retirement planning can help you do all this. In literal meaning, retirement planning is deciding the retirement goals and the actions needed to fulfil them.

In a simple sense, retirement planning is not just to plan your finances after retreating, but in all aspects of life. This includes lifestyle choices, how much is needed for retirement when to retire and more.

Therefore, making a financial plan is the first step when planning for your retirement.

How much do you need to retire?

The answer to this question is highly subjective and personalized. In fact, it depends on your retirement goals – and when you plan to retire- and how quickly can you achieve them. Some say you need at least 80% of your income at retirement.

Suppose you are earning ₹24 lakhs per annum, you would need savings around ₹19.2 lakhs per year for roughly 20 years or ₹3.84 crores whereas some feel that it is difficult to meet the same benchmarks and should make adjustments in their current lifestyle.

Although it is difficult to find the right amount and there are retirement planning calculators available in India, you can calculate in the following way:

Step 1: Determine your lifestyle and how much money is required to maintain your lifestyle. This is not based on how much you earn but how much you spend. For example, you spend ₹50,000 out of your salary.

Step 2: Multiply the amount by 12.

This will help you achieve the goal easily as you have a number in your mind.

When should you retire?

Again, this question is highly subjective. However, here are a few questions that can help you decide the right time to retire.

• Why do you want to retire?

This is a critical question and determines the real reason behind your retirement. It could be a stressful job, or changing your career path. This will give you a clear understanding to know when is the best time to retire.

• Will you be happy after retirement?

Some people love what they do and wish to do that in their entire lives. If you are one of them, then you need to know whether you would want to retire or just reduce the workload or even continue doing the same work throughout.

How to plan your retirement?

Here are a few tips to plan your retirement smoothly:

• Plan your retirement with 50 as your retirement age

People are no longer working in a secure job. It could be a problem if your company is retrenching and you don’t have a plan B. Therefore, it is best advised to plan out your retirement age as 50 and start saving early.

• Do NOT touch your long-term savings

Some of the long-term savings such as EPF, or PPF is sacred. Although these savings have some form of liquidity, you should not be touching them before your retirement.

• Take a risk on investments

The current investments that are popular in India are endowment policy and Unit-linked investment plan(ULIP) give suboptimal returns. Moreover, they can not beat the inflation too. Isn’t it strange that you are risking your post-working life by not planning your retirement but are not taking risks on investments? You should have a good mix of equity in your financial retirement plan.

• Do not keep any long-term debt after the age of 40

This will help you invest more and thus make your retirement phase smooth and comfortable. In fact, the amount that will go for any loan repayments can yield you double profits if invested properly.

• Automate your investments

We often say that there isn’t any money left to save. This is because we end up spending the money that should be saved otherwise. Automating your investment contributions will ensure you don’t miss out on your investment plan for the future.

Remember, retirement planning starts a long way before you retire. Therefore, the sooner, the better.