A detailed guide to retirement planning in India

Today, you might be employed with a reputable company and earning enough to live a happy life. But have you ever thought about what will happen once you stop working? As per a recent survey by a private insurance company, three out of four Indians fail to save enough for their retirement and, as a result, remain dependent on their children during their golden years.  That is why retirement planning, including a solid retirement investment plan, is essential.

However, the bigger problem is a majority of India is still unaware of how to plan for their retirement. If you are a part of this majority, then this article is for you.

Here, you will find a step-by-step guide to help you in your retirement planning. You will also learn about the best retirement plans in India, where you can invest your money. 

Importance of retirement financial planning

Before we move on to the steps involved in retirement planning, let’s throw some light on its importance. Here’s why retirement financial planning is crucial:

• To meet your living expenses after retirement

When you retire, your income stops permanently. Therefore, you may need a corpus to fall upon to meet your day-to-day expenses. These may include grocery expenses, healthcare expenses, etc. It's crucial to have a well-thought-out retirement investment plan in place to ensure financial security during your golden years.

Also read - Top 10 money managing tips for family and how to use the benefits of Savings Account

• To tackle unforeseen situations

Facing healthcare problems is very common during old age. Should a medical emergency arise, you may need significant finances to ensure adequate treatment. With proper retirement planning, you can create an emergency fund to manage these unforeseen situations.

• To meet your post-retirement goals

Retirement is not the end but a fresh start. You won’t have to go to an office anymore or worry about paying staff. You will have ample time to focus on goals and ambitions, such as exploring new locations, writing, painting, cooking, etc. However, you can enjoy all these post-retirement dreams only if you plan for them well in advance.

• Ensure a comfortable life for your spouse

In the absence of proper retirement planning, it’s not only you who may struggle but your spouse can as well. Hence, it becomes your responsibility to create enough of a corpus during your working years so that both of you can live peacefully after your retirement.

• To prepare for a long life

Thanks to the advancements in medical technology, more than half of our population lives to 78 and older. The longer you live, the higher your financial needs. Hence, it’s imperative to start your retirement planning as early as possible.

• To avoid becoming a burden on your children

You have worked hard your entire life to provide the best for your children. The last thing you want is to become a burden on them post retirement. It’s better to live a financially independent life even after you stop working.​​​

Steps involved in the retirement planning

Planning for your retirement is a multi-step process. Here are some things you need to do:

Step 1 – Determine how much corpus you will need for your retirement

The first step to retirement planning is identifying how much money you will need to ensure a comfortable post-retirement life. Only when you know the amount of corpus that you may require will you be able to create a plan for building it.

While determining your retirement corpus, make sure to consider your current lifestyle, hobbies, interests, post-retirement dreams, number of dependents on you, etc. Additionally, do not forget to factor in inflation.

Step 2 – Develop your retirement timeline

The next step of retirement planning involves deciding on the retirement timeline. Not everyone wants to retire at the same age. While an assumed age for retirement from government jobs is 60 years, you can even choose to retire at the age of 40 or 50. 

Based on the age at which you wish to retire and how old you are currently, you can develop your retirement timeline. Be sure that it defines how to create the required corpus in the specified period.

Step 3 – Research the retirement plans available in India

After you know how much corpus you need to create and in how much time, you need to start investing in a suitable retirement investment plan. However, the availability of a gamut of retirement plans in India can make your task a bit difficult.

What you should do is research and compare different retirement plans based on their lock-in periods, the returns that they can provide, and the withdrawal rules associated with them.

For example, an annuity retirement plan allows you to get a regular income after your retirement. A mutual fund allows you to build a large corpus by investing in the equity markets. And a savings account offers fixed returns on your investments with the benefit of compounding.

Step 4 – Start investing for your retirement

After you have selected the right investment plan, you need to start investing in it for your retirement. Make sure that you invest enough every month so that you have the required corpus to tackle all your needs after your retirement. 

For example, you can start a Systematic Investment Plan (SIP) per month in a mutual fund scheme. Alternatively, if you want fixed returns on your investment, you can start saving a certain amount every month in your savings account.

With IDFC FIRST Bank Savings Account, you can earn up to 7% per annum interest with monthly interest credits. It can help you immensely in your retirement planning.

Step 5 – Create a withdrawal strategy

Merely investing in a retirement plan is of little help if you don’t have a withdrawal strategy. You need to decide how you want to withdraw and use your retirement corpus.

You can choose to withdraw your retirement corpus in different ways. For example, you can either withdraw your entire corpus in a single instalment at the time of your retirement, or you can choose to withdraw them in the form of a fixed income after your retirement, up to a certain period.

Also read - Savings account charges you didn’t know

To sum it up

Adequate retirement planning is crucial to ensure that you don’t have to depend on others during the golden years of your life. However, it’s essential to invest in an appropriate retirement investment plan so that you can build the required corpus.

IDFC FIRST Bank Savings Account can be an ideal retirement planning tool where you can park your money. It offers benefits like monthly interest credits and zero-fee banking*  on 28 commonly used savings account services, among others. Why wait? Open Bank Account Online today.

*IDFC FIRST Bank offers Zero Fee Banking on Rs. 10,000 Average Monthly Balance (AMB) Savings Account and higher account variants, subject to maintenance of AMB in the account.
These services are being offered free in good faith, and in case of abuse, the bank reserves the right to charge fees as per market norms. All rights reserved.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.