Retirement Planning

The decision of retirement can be simple. Poor health can’t continue to work after a certain age. There is the mandatory retirement age in every country. Social and cultural norms can influence the decision. In addition, personal life choices and goals also affect retirement plan. Also, the need to accumulate sufficient money for retirement can greatly affect the decision. Retirement planning is also an integral part of Financial Planning.

Meaning of Retirement

According to you, what is retirement? There are many answers as there are people. Images of sitting around in a chair are getting older every day. It is no longer valid for most people. Retirement can mean starting a new business, traveling the world, getting additional education, and seeing children and grandchildren. Moreover, it includes shifting to another job, expanding hobbies, donating time to charitable causes, and much more. For some people, it may even include relaxing in a chair

A person’s view of retirement indicates the foundation to develop their retirement plan. There may be different approaches to retirement. For example, 1) Dhiren didn’t want to spend most of his time sitting at home. 2) Prasad wants to get start a new business. As a result, retirement planning is to gain a clear understanding of what retirement looks like to a person.

Retirement Goals

Once a person reaches retirement age he/she wants to stop working. So, the primary planning goal is to provide enough money, so that individual has sufficient money to stop working. There are various activities a person may take up in retirement.

Starting a Business

For most people starting a business is a dream. A record number of people are leaving their jobs after the pandemic COVID-19. It is also known as ‘Great Resignation’. Also, reality shows like Shark Tank influenced many of us to want to become entrepreneurs. People want to expand their hobby into a business. Doing this can be rewarding and potentially lucrative. However, it doesn’t guarantee cash flow. Ofter it results in cash flowing out than in. If it becomes successful, new business can provide a good retirement cash flow. However, individuals should carefully invest his/her money in a new business.

Travel & Hobbies

There are many places to see and cultures to experience in the world. People often look forward to traveling during retirement. Also, parents want to spend their time with children and grandchildren. Retirement seems the perfect time to travel. People can take up hobbies, as this would give them different opportunities. It includes having a second career, doing something you love, meeting new people, gardening, yoga, meditation, writing, etc. Retirement gives you the free time to do new things, but you should accumulate money before retirement. Once the money is gone, it’s gone. A person may have little opportunity to earn money.

Additional Education

An advanced degree may help the retired person to get a new job or start a new business.  He/she can also become a professional in a certain area. While a newly retired person has time and desire but he/she may have difficulty gathering the required money for an additional degree. So, some money should be allocated before retirement for this. Learning a new skill takes effect and time. Moreover, a new degree or skill can help to generate additional cash flow over time.

Working at a New Job

People sometimes want to continue working, but not with their current employer or position. Executives and others work for 50 -70 hours or more each week. So they just want to cut back to part-time. There are also other reasons like: 1) limited career opportunities, 2) relationship with colleagues, 3) not being valued by a manager, 4) poor employee benefits, 5) wanting to change job industry entirely, etc. This will also result into loss of benefits and cutting cash flow. However, shifting to a part-time and starting a small business is a good way to supplement retirement cash flow. It also helps to keep the retiree active.

Giving Back/Charity

Few people want to focus on giving back to society during retirement. Giving back doesn’t always mean in terms of money. The top executives can view coaching to newly minted managers. Mentors can give you mentorship to new entrepreneurs on how to succeed in business. The teacher can help in educating children who are unable to pursue education. Lawyers can provide legal services to non-profit organizations at little or no charge. Medical professionals or doctors can provide medical care to economically weaker people. Some people willingly donate much of their retirement through Charitable Trust.

Steps in Retirement Planning

1) Decide your retirement age

2) Calculate your retirement corpus

3) Start investing in early age

4) Cut down unnecessary expenses

5) Create a balance portfolio with the help of Financial Planner

Retirement Products

National Pension Scheme	EPF	PPF
Post Office Monthly Income Scheme	Pension Plans	Mutual Funds
Senior Citizen Saving Scheme	Equities	Fixed Deposits

Glide Path

An investment strategy known as Glide Path, suggests that a portfolio shifts from higher to lower equity exposure as the individual heads towards, and lives in retirement. In this strategy, equity exposure is greatest in early age. Also, it never completely goes away. The glide path also suggests an approach to investing that focuses on providing sufficient retirement cash flow rather than asset accumulation. In the end, an individual’s portfolio will consist of fixed cash flow instruments like bonds, FDs, cash & cash equivalents.

Do the Hard Work

A person should start early for his/her retirement planning. People should realize that they have to adjust their current lifestyle to achieve future goals. They should know that they have to pay a price – either now or later – for the choices, you make about handling your money. However, a big part of retirement planning must focus on the current cash flow management.