A basic financial plan helps an individual comprehend their source of money and facility for expenses. One must prioritise their savings over expenses to ensure that they save and invest enough to reach their financial goals. Several individuals live in the dark that financial planning is solely for younger individuals or working professionals. However, that is not entirely true. It is as important for retired individuals as well. Whether you are working or retired, the rules of investing do not change. In this article, we will understand why retired individuals must give importance to financial planning.
What is retirement planning?
Retirement might be viewed as the end of the daily struggles of an individual. Retirement planning is the process of creating a regular source of income for people who do not have the security of their business or jobs. Under this process, an individual identifies and apprehends their retirement goals and make necessary investment decisions to achieve it. One must consider certain important parameters such as their financial goals, risk profile, age, income levels, expected standard of living, etc. before devising their retirement strategy.
Why is retirement planning an important financial undertaking?
Let’s understand why financial planning is an important milestone to be checked in an individual’s life. Here are a few reasons that will briefly explain the same:
- One cannot work for eternity
- It might not be a good idea to be dependent on your spouse or child
- As one grows old, they might have to face higher complications in the form of medical contingencies
- The average life expectancy of an individual is growing
- It may help you to contribute to your family even while you are not working
- Proper retirement planning and execution might ensure that one is dedicating enough time to achieve their aspirations in life
- A good retirement plan may help an individual to start planning and investing from a young age and even help them diversify their investment portfolio
- Also, it might be risky to rely on just a single source of income (in this case, pension)
How to plan a healthy retirement corpus?
To earn a significant sum of money for your retirement, it may be an excellent idea to start saving for it as soon as possible, probably right from your first pay cheque. Starting a retirement fund is the early stages of your working professional might help you to accumulate a substantial amount of money. What’s more, it might even aid in dipping the burden on an individual by ensuring a stress-free retirement life for an individual. Investors often make the mistake of pushing off their retirement plans as something to be done later. However, had they tapped on the opportunity of saving for their retirement from an early age, they would not only benefit from reduced burden in later stages, but might also allow them to invest a smaller amount and grow this amount as their income grows through SIP mutual funds. Happy investing!