What are the Stages of Retirement Planning?
With the evolving dynamics of life, retirement goals may also witness a radical change. Our earlier generations focused on fulfilling responsibilities towards family and living a peaceful life post-retirement. However, today we aspire to reduce our working lifespan and enjoy the fruits of our hard work with early retirement, living carefree for the rest of our lives.
Let's walk through the different stages of life to understand how to prepare for retirement:
Youthful Adulthood - Planning Period
This stage could be typically characterized by several priorities such as financing professional aspirations, buying a house, and building an emergency corpus for contingencies.
During this phase, investors are willing to take greater risks and allocate a large pie of their portfolio to growth-oriented assets such as equities to earn relatively higher returns over the long term. While individuals embark on their investment journey to achieve goals, not many realize that they should also chalk out a retirement plan to secure the golden years of their lives.
Middle Age Group - Transition Period
You may have to finance your child's further education, support ageing parents or repay loans availed earlier. Moreover, with rampant lifestyle diseases, you would seek medical insurance plans to curtail your financial obligations.
As retirement is nearing, middle-aged investors may choose to shift from an aggressive investment strategy to a dynamic asset allocation strategy to balance the risk of the portfolio. Hybrid mutual funds expose the portfolio to a blend of equity and debt, offering the best of both worlds - equity could generate capital appreciation over the long term while the debt component could cushion the impact of the fall during market downturns.
Senior Age Group - Reap the Benefits of your investment
Embrace your retirement phase with open arms; it's time to bid farewell to your fast-paced work life. In this phase, you would accept cash flows from various sources such as systematic withdrawal plans, annuities, dividends, and capital gains.
Investors would be more conservative by allocating most of their portfolios to relatively stable investment options such as debt mutual funds and other fixed-term instruments.
Don't skip out on reviewing your portfolio regularly and monitoring the plan at every stage of your life. In case of any changes in goals, the allocation would warrant rebalancing in line with your requirements.
- Set a target retirement age
- Identify your retirement goals
- Calculate the amount you will need to meet these goals. Factor inflation into the calculation
- Invest in the right retirement plan that can help you stay financially prepared to meet your post-retirement goals.
- Your retirement age
- Your health and lifestyle
- Any loans or liabilities
- The retirement goals you may have
- Any commitments you may have to fulfil