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Apr 2023
3 mins read
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7 Steps for Effective Retirement Planning

89%1 of Indians who feel unprepared for retirement, do not have any alternative income. Good retirement planning is essential if you want to remain financially independent in your golden years, once your regular income ceases. Here are 7 steps to plan for a worry-free retirement:
1

Estimate your retirement age

Estimating the age you plan to retire will help you calculate the retirement corpus you’ll need, and the time available to accumulate this corpus.

point 1
2

Know your income replacement ratio

The income replacement ratio is the percentage of pre-retirement income you'll need to maintain your lifestyle. While the rule of thumb is 70-80% of your pre-retirement income, this may increase depending on your retirement goals.

point 2
3

Know your retirement readiness

How prepared are you for retirement? Use the retirement readiness calculator to know the amount you should start investing.

point 3
4

Start investing early

The earlier you start investing, the more you will gain later in life. For instance, investment through SIPs can help you take advantage of Rupee Cost Averaging while potentially earning inflation-beating returns even with relatively small amounts invested per month. Try to invest in a mix of mutual funds to build a diversified portfolio that aligns with your goals and risk appetite.

point 4
5

Build a healthy cash ratio with savings

Saving plans like Fixed Deposits (FDs) can help you build liquid assets with fixed returns. While the return potential on these is lower than with equity, they allow you to build a healthy cash ratio to enable you to meet any sudden expenses.

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6

Invest in the right insurance products

Insurance products like life insurance or health insurance protect you and your family against financial setbacks during or even before retirement. Having this cover will also ensure that funds earmarked for retirement are not consumed by other emergencies.

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7

Make yourself debt-free before retirement

Paying off loans can get extremely difficult when you have little or no income post-retirement. Avoid undue stress by clearing off all your debts well before retirement.

point 7

Take your time to build a sound retirement plan, and then review it regularly - life is dynamic, and a lot can change over the years. With a well-defined and regularly updated retirement plan, you can be assured of a peaceful and fulfilling retirement.
Source links:
1. https://data.worldbank.org/indicator/SP.DYN.LE00.IN?locations=IN

- Retirement Survey -https://www.pgimindiamf.com/retirement-survey

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