Have a comfortable retired life!
Are you worried about your retirement years? Do you have enough savings to lead a comfortable life post retirement? If not, then this is high time you opt for a comprehensive retirement plan.
At the twilight years of your life, you need to have a regular flow of income to sustain the cost of living, which includes certain impacts of inflation. A good retirement plan will ensure that the future financial requirements will be met.
How Retirement plan works?
Retirement plan is a fund where you set aside a specific amount of money on monthly, quarterly or yearly basis for your retirement years. The calculation of retirement benefits depend upon the nature of plan – whether you will receive a lump sum amount at the end of your retirement or monthly annuity as per your life expectancy predicted by the actuary. Most of the retirement plans offer investment options to several secured funds, where the investor will bear the risk of profit or loss.
Stages of retirement
We can say there are three stages of retirement - funding for retirement, nearing retirement and into retirement.
‘Funding for retirement’ will emphasize on:
* Saving regularly for potential payoff in future.
* Exploring different types of investment options that will provide you the potential to increase your retirement savings through investment earnings.
While ‘nearing retirement’, you need to focus on:
* Transforming retirement savings into a secured lifelong income.
* Making contributions to ‘catch-up’ retirement plan.
* Trying to maximize your Social Security benefits.
* Planning in advance to deal with rising healthcare costs.
For ‘in retirement’, you need to take up strategies on how you can:
* Generate and protect the current retirement income.
* Try to make the most of health insurance policies.
* Work in your retirement years and efficiently manage your Social Security benefits.
Formulate a Retirement strategy
Firstly, you need to formulate an effective retirement strategy prioritizing your requirements at the time of retirement.
You require to have a vision for the future and think about the followings:
* Where would you live once you retire?
* Will you work in your retirement years?
* How can you get the most out of your retirement.
Determine the cost in retirement
This will help you to assess your needs in retirement:
* Identify your all your expenses, assets and sources of income.
* Planning for contingency and the obvious impact of inflation.
* Opt for healthcare options such as individual insurance, group insurance and COBRA.
Fund your retirement
You need to fund or replenish your retirement plan to get the best possible return at retirement. Try to focus on the followings:
* Assess secured retirement investment options provided by the plan.
* Manage your income judiciously throughout retirement.
* Fill the income gaps if there is any.
Types of Retirement plan
Worldwide there are basically two types of retirement plans available – Defined contribution or 401 (k) plan and Defined Benefit plan.
In Defined contribution or 401(k) plan, usually both employee and employee contribute almost equally for the retirement years of employee. When the employee retires or even quit the job before retirement, he/she can withdraw the money in lump sum or rollover to another retirement plan.
In contrary, in Defined benefit plan, employer is the primary contributor, where the contribution can be done monthly, quarterly or yearly for the retirement years of employee. After the employee retires, he/she will receive monthly annuity based on the life expectancy.
Pension Plan by Government of India
In India, besides the retirement plans provided by private insurance companies, Government of India introduced a plan couple of years back called ‘New Pension System’. At the time retirement, this plan will provide both lump sum amount and a fixed monthly income throughout lifetime.
In sum, retirement plan is a tool that helps you to plan meticulously for all pre and post retirement stages to have a comfortable and happy retired life!!
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