Importance of financial Planning for Retirement

• 4th Mar 2020
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Retirement is a much-needed break you get after working for years on end. But it also halts your monthly salaries and increments. Suddenly you have to keep an eye on your expenses and curb the need for splurging on certain luxuries. But is this the ideal retirement plan? To avoid this, let’s understand why you need to plan your retirement beforehand to secure your expenses.

What is Retirement Planning?

Retirement planning is the process of understanding your expenses and setting specific goals to take of future expenses. Without a steady income, you will have to manage your cost of living and also account for emergencies. With the help of retirement planning, you are able to take care of your spending without depending on your family.

Why Should You Start Retirement Planning?

Retirement is a period where you have no steady income to rely on and passes by quickly just like your first day at work. Gone are the days when you could save up some money and depend on your children. With the ever-increasing inflation rate and unforeseen emergencies, everyone needs to have a sufficient amount of financial backup to depend upon. So, to make your retirement a smooth journey, it is crucial to start planning as soon as possible.

Reasons to Plan Your Retirement

1.Inflation

The rise in cost is something that is inevitable. The rate of inflation may seem to be less if you consider it in the short-term but in the long run, it can greatly affect the value of money. And this not only influences the prices of luxuries that you may avoid buying during your retirement but also affects the cost of basic goods. This is why you need to have enough corpus to withstand inflation.

2.Medical Expenses

In today’s day and age, any medical emergency can come knocking at your door, leaving a dent in your savings. Also, the cost of medical help is increasing with no sign of stopping.
Due to this, you have to consider the medical expenses that you may have to bear in an emergency. With precise planning, you can enjoy your retirement days without any worries.

3.Lack of Pension

Unless you are a government employee, you won’t have a pension system at your organization. This creates a requirement to invest in pension schemes so that even you get regular payouts during retirement. It’s never too late to start and it stands true for pension schemes as well. Even if you are in your late 30s, you can choose a lucrative financial instrument that plays the role of a government pension.

4.Freedom

Though it is only natural to expect your children to look after you, it is not fair to entirely rely on them. Instead of waiting for them to take care of your financial needs, you can build a safe for yourself and become self-sufficient. This will not only make you carefree but will also help you gain financial freedom. You will be able to spend the way you want without having to think about the impact of it on your children.

Importance of Retirement Planning

The main reason behind planning early for your retirement is to have an income source when your regular salary stops. With the uncertainty in life, you cannot predict anything. Hence, it is vital to secure yourself and your spouse in the retirement phase. A life insurance policy helps during those unforeseen incidences and safeguards your loved ones. In case something happened to you, your dependent family members would have the death benefit to assure their financial independence.

- A Consumer Education Initiative series by Kotak Life