A person needs to consider multiple things in retirement planning. Here we have tried to elucidate some of the critical things that one must consider while planning for retirement.
- Expenses - Firstly jot down the existing expenses and the then cut the expenses that you expect will not incur during retirement period. Then add the additional expenses which are expected to incur during retirement like medical cost etc. A person should very carefully add the post-retirement expenses as underestimation can significantly impact your retirement planning.
- Inflation - Mangoes which were costing Rs.10 per kg 10 years back are selling at Rs. 80 per kg today. Similarly, all daily needs of life are getting costlier on regular basis. This hike in prices is called inflation. While estimating the monthly financial expenses during retirement days one should consider inflation.
- Risk and Returns: It’s a known fact, higher the risk, higher the return. Investing in shares can be a risk but in long term shares can give handsome return. Similarly, fixed deposit doesn’t have any risk but the return is very low. So one should have proper balance in the portfolio of both the risk and return before starting investing for retirement.
- Taxes: Income tax is unavoidable. The total charge of tax can go up to 30% of the income as per present Income Tax Act, which is substantial part of income. But there are certain long term investment products where all incomes and gains are tax free. Besides, there are many investment products where income tax is less than nominal rates. So one should also prudently do the tax planning.