PLAN EARLY FOR RETIREMENT

Plan early for retirement





At a recent seminar, one of the guests commented that one of the biggest benefits of the improvement in medical sciences is a longer lifespan for almost every one.



 

                                                                                                                                According to him, 70s would be no more considered old age for men and you are likely to find more elders in the age of 90s than at present. While that might please all, it has its own disadvantages too. One will have more decades of retired life than his parents. In these times of hectic career life, the retired life is going to be at least 3-4 times more which means your money will have to work overtime to keep you alive.







Needless to say, the planning for post-retirement life has to begin at the earliest, the moment you start earning to be precise. The basic step is to get into the habit of investing by creating a surplus out of your income. Even if it means a small sum of Rs 2,000 per month, it is good enough for someone in the 20s as it can help in creating a large corpus over the long term.







Wealth creation can be in different forms but those who think of creating retirement corpus early in life can go for a combination of high risk assets. These could be stocks, and can cover debt and commodities at a later stage. Equity allocation can be done in three forms - mutual funds, stocks and unit-linked pension plans. The first two options are more flexible but pose the danger of discontinuance, whereas pension plans are slightly more long-term and don't allow withdrawal at least till the age of 50.







Even within pension plans, options are offered by insurance and mutual fund companies. While the former offers the option of choosing equity and debt allocation, the latter is more that of a balanced approach and has additional advantages such as flexible payment options. Another advantage of both pension plans is that they ensure regular cash flows after retirement.







While those who think of retirement at a younger age have plenty of options, it is not the case with those who think about it later in life. The lesser income years coupled with lower risk taking abilities push the older investors to be defensive approach. That would automatically mean lower percentage of risky instruments and higher percentage of moderate or no-risk products. But the biggest advantage for these professionals is that they have the ability to contribute a higher amount towards retirement fund than younger ones.







Some of the products in this case could be monthly income plans with growth option and balanced funds. A small percentage of the investment portion can find its way into large-cap funds or stocks if the investment tenure is in the range of 5-10 years.



Not everyone takes the equity route. Many tend to chase property for their surplus.







However, retired professionals or those on the verge of retirement will have to look for generating cash out of this illiquid asset in the older age. Selling or renting out can be one of the options for those sitting on multiple properties. However, the corpus in the case of sale of property needs fund management over a long period of time. Even immediate annuity plans can be one of the options for such investors.





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