Below are the 10 steps one must consider in any good retirement plan. Following these points can ensure a comfortable and safe retirement for you and your family.
1. QUANTIFY WHAT YOU VALUE MOST IN LIFE
What you value most in life is a representation of who you are as a person. There is no right or wrong answer, it is an entirely personal blue print of what makes you who you are and in order to plan effectively for your retirement, you should always start by detailing your values.
2. PRIORITIZE WHAT IS IMPORTANT TO YOU
It is proven that there is a high correlation between people who achieve their goals and those who have committed them to paper.
A financial plan is about prioritising and charting your key goals and objectives on a timeline, then documenting how they will realistically be achieved. This process is one of the most important things you can do, to achieve a comfortable retirement and meet your other financial priorities along the way.
3. NURTURE YOUR PROVIDENT FUND
In all likelihood, provident fund will be your biggest retirement asset. To explain it simply, provident fund is a ‘investment avenue’ which has highly favourable tax rates designed to encourage us to save for our retirement. The tax treatment is so good in fact, that one should not miss out investing maximum possible amount into this investment avenue (depending on your circumstances). This is essentially similar to investing in a tax haven, but it is legal and minimizes your tax outflow too! If you dont have access to a regular PF account, you can try the new NPS scheme as well.
4. HAVE A PLAN FOR HOW YOU USE YOUR FREE CASH FLOW
What you can afford to save, is the amount of money you have to play with to meet your short, medium and long term goals. The first important step is quantifying what you have and this can be done in a range of ways, including budgeting, committing to a savings target or looking at how much you are paying off your home loan.
5. CONSIDER INVESTING SAVINGS OR ACCUMULATED CAPITAL
Most of us have accrued capital that is either locked away in bank accounts or home equity. Quantifying how much you have and what you are prepared to invest for the future, is the next most important step in securing your retirement.
6. LEGALLY MINIMIZE YOUR TAX LIABILITY
Tax is the biggest expense most of us will have in our life, yet few of us understand how to structure our finances to achieve a lower tax bill.
7. STRUCTURE YOUR DEBT PROPERLY
Typically the second biggest expense after tax that most Indians have to pay in their life is the interest they pay to the bank. Ensuring your debt is structured properly throughout your working life, can save lakhs of rupees over the journey and like tax, it can offer a guaranteed rate of return, by virtue of paying less interest.
8. PROTECT YOUR DOWNSIDE
Risk mitigation is equally important to growing wealth. In fact, without effective risk strategies you will almost certainly underperform your potential.
9. WHEN YOU RETIRE, MANAGE YOUR ASSET DRAW DOWN
One of the most important things that you can do, when you reach full retirement and begin drawing down on your asset base to fund your income needs, is manage your asset draw down. Managing your asset allocation effectively throughout retirement is the key to maximizing your retirement savings.
10. SEEK ADVICE
The value of advice can be broken down into four fundamental categories. How you priorities what is most important will differ from the next person probably, however understanding what you value in advice most will help you be clearer on what you are looking for from an adviser.