Retirement today is not the same as it was for our parent’s generation. The generation today does not want to fade away into woodwork. They want to live a full life after retirement. They want to maintain an active lifestyle and not be dependent on their children. Hence retirement planning takes on a very important role.
Here are 5 must do's that pave a way for a great retirement:
1. Be ready to take on a second innings
Retirement arrives as a big change in life. You wake up one day and do not have anywhere to go. So the big question is, “Are you ready for it?” What do plan to do after retirement - after seeing all the movies you have saved up, after taking the world trip, after learning to make your breakfast – what do you plan to do?
For most of us, 60-65 is not old age and we are not quite ready to read the news paper and watch TV all day long. The body and mind are active and you could use your experience for a related work area - a consultancy, teaching, start a business. Besides, keeping the mind supple, it will supplement your retirement income. So if you are nearing your retirement age, it is time to start planning for a post retirement innings.
2. Set up your own perks
There are many perks that go with a corporate job which will disappear once you retire. The most important of these being - coverage of medical expenses. Many employers provide medical insurance or reimbursements for the employee and the family. This will disappear once you retire. So you need to start planning for medical insurance a few years before you retire. As you get older the insurance rates get higher. A good option to keep rates lower would be to be included in a family insurance plan where your son or daughter is the principal insured.
3. Estimate your expenses
A few years before retiring you need to extrapolate your expenses. To start with segregate expenses into taxes, living expenses, healthcare and leisure. Calculate the current expenses in these categories and then use the appropriate rate of inflation for that category - everything does not increase at the same rate. Also the amount you spend on each expense may change after retirement. For instance, expenses such as taxes, daily travel, eating out may go down. Other expenses such as health care, leisure travel etc might rise. Estimating your expenses lays the basis of retirement planning and you need to have an idea about your retirement goals several years before retirement to give yourself enough time for goal achievement.
4. Get a new salary
After retirement you will no longer be getting the monthly salary that has met your regular expenses. You can however set up the flow of income from investments, including pension, to come in as an equivalent to your estimated monthly expenses. Do remember to increase or decrease the “salary” according to the estimated change in expenses due to inflation.
5. Expect the unexpected
No matter how well planned we are, the unexpected has a way of surprising us. It could be your son asking for financial help to start his business or an illness that could set you back financially. Be ready with emergency funds that are kept away securely, infact it makes sense to plan for more than just one contingency. Set up 2-3 contingencies or emergency funds because you never know when life surprises you
(By Aditya Birla Money)