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Why plan for retirement?

india Updated: Feb 27, 2013 16:45 IST

Hindustantimes.com
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Before taking a dig into a guidebook for successful retirement planning, it is important to understand why should we plan? Why not let the life surprise you at every stage of your life and enjoy the ride as it is?

Retirement planning means planning for the next-stage of life and preparing as much as you can, so that you don't only live the life in its dusk, but enjoy it. Planning is pertinent to give the security and confidence that you can live it with your own, without being dependant on your children.

Retirement is the time that gives you luxury of not living by the clock and doing everything that you wanted to, from a long time, including going on vacations, reading books, watching the unwatched movies, etc, etc. But all this is possible if you are mentally free from all the money-relation woes. And that can only happen if you save so much that you don't have to think about it. This saving first and living it later technique is called retirement planning.

The planning for is crucial even if you don't plan to retire as your planning ensures that you will be working by choice, instead of being forced to work.

Financial Security

However, research done on pan-India basis have shown that most working people in India do not plan for their savings and live in misconception that their current savings will be enough to take care of them. However, this never happens, and they have to face the hard reality when they reach that stage. Though, at that time, nothing much can be done, except living as a burden on somebody else.

Take the benefit of time

Also, another reason for it is to take the benefit of the compounding interest. As most of the financial instruments help you grow the money by offering compounding interest, it makes more sense to let the money grow, instead of keeping it idle in the bank account or safes at homes. However, this can be fully utilised if you develop a habit of investing on a regular basis, perhaps monthly or quarterly. One golden rule to keep in mind is that avoid the temptation to break the deposit for less-than-urgent needs as it will dilute the effect of compounding.

Flexibility to deal with changes

For many people, retirement is a stage when income stops but expenses shoot. Besides, these expenses are more crucial to meet as most of them are health-related. Life tends to throw a curve ball at us every now and then. Unforeseen illnesses, the financial needs of your dependents and the uncertainty of system are a few of the factors at play.

Regardless of the challenges faced throughout your life, a secure nest egg will do wonders for helping you cope.

Maintaining Lifestyle

Maintaining a similar or a comfortable lifestyle is unlikely depending on the government schemes. Hence, you have to plan to yourself. To do that, you need to take in account all the foreseen expenses in advance and accommodate inflate to find out the corpus you would be requiring at the time of retirement. Once that is deduced, it is essential to now look for the ways it can be achieved.

While planning, do not forget to accommodate the medical exigencies, longevity of life and financial security of your dependants after you. Looks like a task, isn't it? But detailed and rigorous planning can do magic and make this gigantic task look a day-to-day activity.

So, plan before the income stops.