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Retirement Planning - The Sooner, The Better.

 As per the Cambridge dictionary, retirement refers to:

 “The act of leaving your job and stopping working, usually because you are old”

In the nations like USA and other developed nations, the traditional retirement age is 65. Mostly this includes Mostly this includes retirement and pension benefits in order to supplement the income of retired people. Planning for retirement involves steps in an order in which goals are set and the measures on accomplishing are done. This includes managing assets, estimating expenses and forecasting incomes. Cash flows as per present value factors are calculated to find out goals achieved or not, In lay man terms this is the phase for which one needs to be ready for time when there is no work only in financial terms but in all senses. Various non-monetary prospects include choices of lifestyle like how to pass time, which place to reside freely, when to quit working completely, etc. A comprehensive approach to this phase should be adopted in order to achieve success. Different time intervals involve different goals like; early years in a person's working life, this is all about keeping side money which will be enough for second phase. During the initial time of professional life, it must involve having specific income or assets. Once person arrives later years of age, he goes from collecting assets to what professionals call the distributing phase. You no longer pay in; instead, the decades of saving are paid out.

One must always start planning before one retires, based on the principle the sooner one starts the better one finishes. Your “lucky digits,” denomination people need to retire, is normally personalized based on individual to individuals give ideas of how to save. Various people use 20% and 80% rule for various calculations.21-35 years people should depend upon the policy of compound interest and should wait for the investments to get mature. Years 36-50 involve earning more money and investing in interest earning projects. For this various tools can be used like retirement plan calculator and retirement fund calculator. It is a useful tool which can be used to estimate the costs of retirement in the future. It largely simplifies the retirement financial planning. It helps to study and work out the amount needed to be set aside monthly to accumulate the right amount for retirement. In order to calculate and use the calculator, one has to simply input expenses incurred during the month, expected rate of inflation which might grow, your current years of age, life expectancy, retirement age, post tax investment returns on retirement corpus, and one will get the result in terms of amount of retirement corpus required lump sum or monthly investments required. It helps to give a direction to planning a retirement. The various benefits are it is easy to work out, considers inflation factor, helps in proper planning for the unexpected and uncertain future, helps to estimate various costs while side by side considering the present value of money in future as per present value factors and further helps to have a stress free post-retirement life. The calculators deal with certain terms:

§  Retirement age – age at which a person is required to stop the work

§  Retirement benefits – a monthly payment and other benefits

§  Pension – an arrangement to pay a person a regular income when they are no longer earning due to age and non-working conditions

§  Life expectancy – the average period usually number of years that a person is expected to live.

§  Desired annual retirement income – the amount that any retired person would wish to have as household income

§  Desired estate – the amount of estate the property a retired person wishes to leave to his loved ones

Professionals say one should start planning start from the day one the person starts earning. This is the expert suggestion that none follows. But in order to be clear for future years and goal setting process various questions are to be answered:

At what time do you want to retire?  How much money do you spend now? How much will your spending grow by the time you retire in the years to come?  How will your spending change after retirement and further years to come? Will you be repaying any loans after you retire or no debt is required? Do you have adequate health cover in terms of health policies? Will any of your goals extend into retirement or not? Will you have any regular income after retirement or will depend upon only payments made by organization for which you worked?  Answering to all these questions will provide an insight and guide to successful retirement planning and goal achievement. Various other options can also be explored in order to have a regular post retirement earning in case one is risk averse or risk lover. PPF and mutual funds can assure a steady income in second phase of life. Many of these investment options are framed with proper guidance. It is always advisable to invest in diversified portfolios in order to live a good post work life.

 One can use an online retirement calculator to get that ideal number that suits them as per own needs and requirements. Retirement schemes and types often vary as per country of residence and place of origin. However, the calculator will also need to find in the nature of the investor and risk profile i.e. whether you are a conservative, moderate or aggressive investor. For instance, the pension plan calculator suggests that conservative investors can pursue insurer-sponsored plans that invest solely in debt. But online retirement calculator suggests that moderate investors can also pursue National Pension Schemes that invest 50% in equity and half of investors use mutual funds. This online calculator cannot be 100% reliable considered and depends upon data provided only and should be considered purely as an indication towards the whole plan. Retirement plan is calculated considering your present expenses and future cash inflows and outflows.


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