By Sameer Joshi
Retirement may be a financial milestone in itself, but there are other goals which you may want to accomplish after retirement. For instance, you may want to renovate your home, travel the world with your family, or even set up your own entrepreneurial venture. All this, while also accounting for your everyday needs and healthcare expenses.
Here are more reasons why it is essential to have a financial plan for your retirement.
Source of passive income
Once you have retired, you will not have an active source of income. Planning for your retirement helps you set up a few sources of passive income, so you can continue to have a steady stream of funds.
Remain financially independent
If you want to remain financially independent even in your golden years, retirement planning is the answer. It helps you build a corpus that is enough to meet your post-retirement financial needs.
Maintaining your standard of living
Even though your income may dip once you retire, your expenses may continue to remain at the same level. In fact, taking into account inflation and rising healthcare costs, the expenses would only increase further. Retirement planning ensures that you can continue to maintain your standard of living, without making any compromises on the quality of your life.
It is crucial to invest in the ideal financial instruments depending on your life goals now, to be able to reap the benefits of these products later in your life. A retirement plan gives you the benefit of a corpus that can help sustain your financial needs post retirement. One must keep the following key factors in mind while purchasing a retirement plan:
Vesting period is important
The vesting period is the time after which you start receiving the annuity payouts. If you are closer to retirement, you need to choose an immediate annuity plan or a plan with a shorter vesting period. On the other hand, if you have several years left to retire, choose a plan with a vesting period that aligns with your financial horizon.
Pension corpus should be adequate
The payouts from the pension plan you have chosen should be sufficient for you to get a substantial regular income and meet your post-retirement needs. You need to account for inflation while computing your post-retirement income. You can even invest in more than one retirement plan to increase your passive income. It is crucial to start saving up for your retirement when you are younger, so you can benefit from the power of compounding. The best time to plan for your retirement may have been yesterday, but the second best time is now.
(The writer is chief agency officer, Bajaj Allianz Life Insurance)