Do you know these golden retirement planning tips?
Many of us hold off on retirement planning till the last moment, and at that moment, we realize that we should’ve started early off. The average life expectancy in the US is 78.8 years. This means that people have more years to live post-retirement. But when they don’t plan well for these golden years, they have to lead a life of constant compromise. In order to avoid this unfortunate scenario of not having enough financial safety cushion, we should plan for retirement as soon as possible.
How do we start off with retirement planning?
Some of the key questions to ask before retirement planning are:-
- At what age should I start retirement planning?
- What is an adequate figure to live comfortably even after I gave stopped working?
- How much should I save every month to achieve this amount?
In addition, we have to factor the cost of caregivers, healthcare, medicines. These costs will keep increasing as per the inflation rate. While it may sound like a challenging prospect, a bit of planning will go a long way in securing your retirement life.
Here are some tips for handling retirement planning the right way.
1. Assess your time horizon
Suppose if you start planning at 25 years, and the retirement age is 60, then you have (60-25) = 35 years to execute the planning. But if you start at 45 years, then you have only 15 years for planning. If you have lesser time, then your portfolio will have riskier investment options. But if you have sufficient time for planning, then you can balance out the risky investments with more conservative options like debt funds, and still reach your goals.
Make sure to start early so that your portfolio has a diversified mix of long-term equity and short-term liquid or debt funds. Also, it is a myth that you ‘fill it once and forget it’, in case of retirement planning.
You will have to continuously check on the portfolio performance to see if the expected returns are on track with your goals and expectations. If not, then it makes perfect sense to connect with a reliable retirement planning advisor in Indiana, like Axiom FSG, for unbiased advice from the experts.
2. Check long term needs
The whole idea of retirement planning is that you have sufficient corpus when you really need it. This factor is crucial for big-ticket expenses like children’s higher education or college. So you need to segregate the plan into two to three components.
Suppose if you need to pay for a child’s education in 5 years and relocate to Atlanta. Now you need two types of investments – one over the short term (for the child’s education) and one over the long term for living in Atlanta (regular withdrawals for daily living expenditure). Plus, you need to re-visit the portfolio every few years so that you can tweak the allocation strategy as per your goals.
3. Check if you are considering after-tax returns
You also need to assess if the ROI is computed post-tax deductions. You should not get a nasty tax deduction surprise that will erode your corpus’ capacity to provide you with a comfortable post-retirement living.
Be realistic that post-tax, your ROI is unlikely to go beyond 10% (even for long-term investments). If you have a heavier composition of low-risk investment, your ROI will be significantly lesser than in the case of a portfolio heavy on equity. The tax return will depend on what type of investment you hold. Hence, make yourself aware of this rate so that you can compute the actual rate of return.
Lastly, make sure to determine your tax status at that point in time when you start making withdrawals in your retirement phase of life.
4. Invest in a senior living community
A senior living community seems a viable option when we consider a few dynamics. Options like the cost of healthcare, caregivers, or physiotherapy will increase as we grow older. The overall cost of living will shoot up in our senior years.
But when you think of a senior living community, the overall costs will be shared across the community, thus lowering the per capita cost of maintaining a fit life. Curated diet plans, on-call physicians, and custom wellness programs are other important benefits that a person can look forward to when he or she invests in a senior living community.
To sign off
With these tips, you can be sure to plan your sunset years the right way. When you factor in these tips, you will be sure to create a much better safety net for yourself. If you need professional advice, then you can get in touch with a leading financial consulting company in Indiana like Axiom Financial Strategies Group. Our experienced advisors will guide you in the right direction for retirement planning.