7 steps to planning a Secure Retirement 1

Retirement Plan

Blueprint of a Financially Secure Retirement

Your ability to have a secure retirement is completely depending on your planning. As I have discussed earlier, personal financial planning is important for having a secure financial life. Retirement Planning is one of the important aspects in proper Financial Planning.

A more secure retirement life after your working years depend on mainly four factors:-

•    When have you started your retirement planning?
•    What was the allocation percentage of your yearly income for your retirement fund in your working days?
•    How well you invested the saved portion?
•    How long you are retired?

Of course, it is always better to start early for retirement plan because you need less money to invest if investment time horizon is long. Now come to the step by step guide for having a secure retirement plan.

1.Calculate your Retirement need:

Compute how much you do need after retirement. While calculating take the living expenses, medical expenses (it may rise) and consider the inflation part.
You may have some wish which you want to fulfill in your retirement life, like- international tour but consider these life-goals into different account, don’t mix up these expenses into your day to day expenses.
These are special needs/wishes and these should be accounted as short term/long term goals in life which I’ve discussed in my Personal Finance Guide Part.

2.Stick to your Budget:

Make a budget and stick to it.  Try to keep away from impulsive buys. We normally tend to buy things while roaming on the weekend with the family, like- buying an extra pair of shoes/clothes (Wow! Sale is going on, but do you require it?) Costs only$50, weekend dinner at restaurant with family costs $70, Weekend movie party with popcorn costs $35, etc.

These are apparently very small expenses but have you thought that these small expenses in together shooting up your budget? It does not mean that you will not enjoy. You keep the entertainment expenses as one head in your budget and stick to that amount only. Don’t overspend.

3.Make at least 7-10% savings of monthly income for retirement fund:

Begin to save for retirement at early age. Make it a habit of saving at least 7-10% of your monthly income for retirement purpose. Start early so that you able to save more with lesser amount of money.

Starting early can make magic with very little amount due compounding interest factor.
Here is an example showing how much you can accumulate with $500 per month savings starting at different age.

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I have an excellent suggestion for you which I follow personally.  In the beginning of every month I transfer a fixed amount to my retirement fund and other special needs fund. Then I survive on the remaining amount by following the budget. This strategy keeps me away from any unwanted spending.

4.Increase your contribution to your retirement fund as income increases:

As your income increases, increase your contribution to your retirement. Whether you are in service or business, your income will rise as you become more experienced.

Intelligently use this increased amount to fulfill your special needs and secure your future. Allocate at least 30-50% of the increased amount for your retirement fund.

5.Asset allocation of your retirement fund:

Now come to the most important part. Where to invest your hard-earned money for your future? First, find out your risk appetite from here.
Then depending on your risk appetite, choose the asset allocation plan from below or consult with a financial Planner for more personalized plan.

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*** Here, percentage is calculated on the total allocated amount for retirement purpose.

6.Change the asset allocation mix as you grow older:

Change and revise your asset allocation mix as you grew older. Revise your plan once in every 3 to 5 years. Because as you grew older, your risk appetite and your income also changes depending on the circumstances.

Suppose, you have started your retirement plan when you were single and after 5 years, you have family with kids. At this time, your family needs will be different, so plan accordingly.
On the other hand, minimize your equity exposure once you are in 50s irrespective your risk appetite.

7.Never withdraw money from your Retirement Fund:

Last but not the least, never ever withdraw money from your retirement fund. Try not to touch your retirement fund and keep it intact. Make required emergency funds, special needs fund and required health and life insurances to meet your emergencies and have a happy and secure retirement life.

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About Moonmoon Biswas

Moonmoon Biswas is an Equity research analyst . She has more than 10 years of experience in this field. She has proven track record in the field of Technical analysis and the Fundamental analysis. From the educational background, She is an MBA-Finance with CFA (India). She has work experience in the leading broking houses in India and has also in hand experience in Australian Security Market. She has her own equity research firm and currently also engaged in digital marketing.

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One thought on “7 steps to planning a Secure Retirement

  • julietmars

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