Planning retirement? Seven tips to ensure your golden days are really golden

Highlights

  • Bad financial habits like reckless spending or keeping up with the Joneses could create a serious dent on your retirement planning.
  • More often than not, high interest loans and credit cards keep a family from saving a decent corpus for investing.
  • To make the most of your investments, start as early as possible to reap the benefits of compound effect.

A lot of people dream about having free time in their golden years. Being not able to meet the basic expenditures in case of early retirement is one of the worst nightmares you could have. In the later years of life, you would need to earn a lot more just to sustain the kind of lifestyle you have today, due to inflation.

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Inflation is the rate at which money’s purchasing power shrinks with each passing year and hence you would have to pay more for the same products/services in the future that you are paying today. On that note, let’s have a look at seven tips to prepare better for your golden years.

Related Article: Steps to build portfolio for early retirement

  1. Determine the cost of your lifestyle

The most important factor in determining the size of corpus or income is your expenses. Your expenses will most likely be different from what you are spending today. For example, in your 60s, you would probably be spending more on your healthcare. You might also want to go to a relaxing vacation every year or maybe travel the world, etc. Every dream or level of lifestyle comes with a different price tag, for which you need to plan in advance.

                       

Retirement Planning: Have you invested enough for your golden days?

 

  1. Don’t break your bank to keep up with the Joneses

Despite earning a decent income, a lot of people find it difficult to make ends meet when it comes to financial goals. In the worst-case scenario, these high-income earners also go broke at some point in time. All this ruckus is the result of bad financial habits such as reckless spending, trying to keep up with the Joneses or not saving enough, etc. Bad financial habits ultimately lead to a rough road. Make sure you are mindful of these habits and work on them as early as possible.

  1. Start investing at an early age

Arguably, the best investor of the 20th century, Warren Buffett started investing at the age of 11. This fact alone stresses on the importance of starting early to become wealthy. It’s never too early to start investing, and the more time you give your investments to grow, the more compounding effect you are going to benefit from.

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Although, you might have time for your retirement, but if you delay investing you will significantly miss out on the compounding effect on your investments.

  1. Saddled with debt? Get it out of your way

Debt is that little monster, which can singlehandedly impact your entire retirement planning. More often than not, high interest loans or expensive credit keep a family from saving a decent corpus for investing. If you have a home loan or a car loan, then the best thing you can do is to max out on your debt payments to finish your loans as early as possible. Once you are debt-free, charting out your retirement plan gets way easier due to that excess cashflow that otherwise would have gone towards debt payments.

  1. Consult a financial advisor

Being able to gauge your retirement needs and charting out a well-planned blueprint requires a decent knowledge on the subject of personal finance. Let an expert handle all the tidbits of your blueprint so that the chances of error or making a wrong judgement are reduced. Your financial advisor would help you diversify your investment to reduce the risk, manage your income streams, save taxes, etc., – all of which is a Herculean task to do on your own, especially if you are a working professional.

  1. Find multiple sources of income

To bootstrap your way to your desired retirement, try to increase your cash inflow. This can be done by the way of finding multiple sources of income. In today’s world of internet, it has become easier than ever.

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For example, a YouTube channel could be opened for free to show your passion/skills to the world. Also, e-books are a good way for writers and e-commerce websites could be leveraged to sell products without ever opening a physical store.

  1. Protect your corpus

The last but not the least is to protect your retirement savings/investment at any cost. What we mean by protection is as you grow older try to cut down on your risk and look for safer returns while investing. Have an emergency fund to fall back on for a few months in case your get financially unbalanced. Always have your medical insurance renewed as uncertain times cannot be predicted, and medical bills these days could torpedo finances even for a well-off person.

Bottom Line

The fact that at one point in life, you would not be as healthy and energetic to work as now makes retirement planning crucial for everyone. To make a decent living in your golden years you have to start your planning from the moment you start earning, so that you could leverage time for your desired retirement.

However, some sacrifices have to be made like cutting down on your reckless spending, focusing more on savings and investments, toning down your extravagant lifestyle. However, if you stay the course, you would thank yourself later.  

Read More: How to become a Retirement Income Certified Professional( RICP)?

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