7 Steps to create a fool-proof retirement plan

Once you have begun your career, they most certainly must be days when you have imagined hanging up your work boots and finally sitting back to enjoy the fruits of your labour. You must already have considered your retirement plan and made a checklist about when you want to retire, where you want to spend your retired life, and what you want to accomplish, once you have all the time in the world. Well, to have a wonderful and satisfying retired life, the first thing you need is a well-defined retirement plan focused on your financial requirements. Investment planning is necessary at every stage of your life, but it is especially imperative during the retirement phase. Here are 7 steps to create a fool-proof retirement plan.

1. Estimate a retirement age:

   If you are in a government job, or a job with a fixed retirement age, you would know exactly when to bid goodbye to your career. However, nowadays, many individuals have an idea about when they actually want to retire, and this may be different from the official retirement age. Some of you may want to retire at 50 to move to a quieter location and start your own business. Others may stay on their job till 60. To create a suitable retirement plan, know when you want to retire.

2. Consider a second career:

   With longer life expectancies, and a focus on mental and physical fitness, many people have the vigour and passion to embark on a second career upon retirement. Prepare for one, if you are inclined to do so. Work on upskilling and reskilling yourself to ensure that you have the capabilities necessary to cope with a futuristic landscape.

3. Determine the retirement corpus:

   Based on when you plan to retire, the projected inflation rate, and whether or not you have a pension or second income, you will be able to come up with an estimated retirement corpus. This will differ from person to person, in line with your retirement plans. If you wish to travel the world, you will need a significantly higher corpus than someone who wishes to return to the village and spend their time farming organic crops. Consider aspects such as the rate of inflation, life expectancy, monthly expenses, and the estimated rate of returns on your long term investments.

4. Start planning early:

   One of the biggest mistakes people make is waiting to be 45 or 50 to start retirement planning and investments. You should begin your retirement planning and systematic investment plans right from the beginning or at least after a few years into your career. This will give you the time you need to create a proper nest egg and invest slowly and steadily.

5. Save religiously:

   Now that you know how much money you need to enjoy an independent retired life; you need to start saving up for the same. Create an efficient saving plan and make sure to set aside a portion of your income each month. This will help you develop financial discipline while working towards your nest egg.       

6. Create an effective portfolio:

   With the high rate of inflation, and increased life expectancy, your savings alone will not help you prepare for a proper retired life. Consider investments such as equity funds and systematic withdrawal plans to ensure that your savings earn you money even while you sleep. Based on your financial goals, interest rates, investment objective, and risk appetite, you can come up with a plan that helps you meet your requirements while taking on the least amount of risk. Always remember, your retirement portfolio should consist of a majority of low risk and stable return investments, and these can include everything from debt funds to large cap equity funds and real estate, based on your investor profile. You can also enlist professional help to create your portfolio, if required.

7. Keep track of the plan:

   It is easy to create a retirement plan and then forget all about it. This is a folly you must avoid. Regularly track your plan and investments, and make alterations wherever necessary.

Now that you know the steps to creating an optimal retirement plan, all you need to do is begin. Start right away to ensure that your retirement is pleasant and fulfilling.

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