{"id":2858,"date":"2021-11-18T19:01:35","date_gmt":"2021-11-18T19:01:35","guid":{"rendered":"https:\/\/www.moneypatrol.com\/moneytalk\/?p=2858"},"modified":"2024-08-13T02:02:45","modified_gmt":"2024-08-13T02:02:45","slug":"retirement-planning","status":"publish","type":"post","link":"https:\/\/moneypatrol.com\/moneytalk\/budgeting\/retirement-planning\/","title":{"rendered":"What Are The Important Things To Consider For Retirement Planning?"},"content":{"rendered":"
\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t

We, humans, hold the idea of a decent life very close to our hearts. One of the most crucial parts of living a decent life is having a good income for sustenance before and till post-retirement. We all face difficulties earning a living at some point or the other in our lives. It\u2019s acceptable and feasible until we are young and working. However, when we are ready to retire, we will not be able to have a decent life if we do not have enough savings set aside for retirement. Hence, retirement planning has to be a vital component during our working life.\u00a0<\/p>

If you start planning for retirement during your early 20s, when you got your first job, you would have almost 40 to 45 years to save towards your retirement. But, if you start planning for your retirement when you are in your 50s, you would only have 10 to 15 years of working life to save money towards retirement. Now, no body is going to stop you from working even after when you are 65 years old, but, to be honest, do you think that in today’s world, where cases of ageism are rampant, would there be any well-paying jobs when your age is more than 65? And even if there are certain companies that would love to have you continue, how long will they let you work – until you turn 75?<\/p>

It is extremely important that one should plan for his\/her post-retirement life. If you want to maintain your lifestyle after you retire, you need to have enough money available that will last for the rest of your life. The key to have no money-related worries during your retirement is to start planning for it as early as possible during your working life.<\/p>

We all need to have a practical approach towards life. For some of us, our kids may help support and take care of us when we are old. But do we really want to be a burden on our kids? Do we want us to have our kids take care of us while they are trying to build their own life and dealing with life phases such as building their career, growing a family and focusing on their kids. And they definitely would have their own financial worries such as saving for their kids’ education, paying off mortgage and planning for their own retirement.<\/p>

Life plans are like dominoes; when one falls, the rest fall with it. In many cases, our retirement plans are dependent on our jobs, our standard of living, our earnings, our circumstances, age, etc. Below are a few important things to consider when planning for a successful retired life:<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

\n\t\t\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t
\n\t\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t

Table of Content<\/p>

  1. How to build a Retirement fund?<\/a><\/li>
  2. How Inflation impacts Retirement plans?<\/span><\/a><\/li>
  3. Do we have to pay Taxes during Retirement?<\/span><\/a><\/li>
  4. How to have an effective budget during Retirement<\/span><\/a><\/li>
  5. How to asses the sources of Income generation during Retirement?<\/span><\/a><\/li>
  6. How to maintain vigilance over Retirement\u00a0 accounts?<\/span><\/a><\/li><\/ol>

    To Summarize<\/span><\/a><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

    \n\t\t\t\t\t\t
    \n\t\t\t\t\t
    \n\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t

    1. How to build a Retirement fund?<\/h2>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t\t
    \n\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t\t\"Saving-Money\"\t\t\t\t\t\t\t\t\t\t\t
    <\/figcaption>\n\t\t\t\t\t\t\t\t\t\t<\/figure>\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t

    A Retirement fund is basically the fund that is kept aside or saved during one’s working life specifically for the purpose of to be used as income source during post-retirement. Let’s say you are in your 40s and plan to retire by age 65. That would mean that you have another 20 or so years left to save for your retirement. Considering that the average life expectancy of adults is 85 to 90 years, you will need enough money that will last for 20-25 years to empower you with a decent retired life for the rest of your life.\u00a0<\/p>

    Now, during your working life, depending on your age and earnings, you can plan to set aside a fixed amount every month as savings towards your retirement fund. If you are in your 20s, you may be able to put aside $500 every month towards your retirement. Assuming a person is 25 years old and plans to retire by 65, he\/she has 40 years to save towards retirement. That means $500 save per month * 12 months * 40 years = $240,000. That’s it $240K. Now, how can someone live for another 20-25 years on only $240K in retirement savings? Well, to be honest, no one can? Then, why save this money?\u00a0<\/p>

    The trick is that you should not Save, but Invest!!! If you were to Invest $500 per month, every month, for 40 years, then depending on your Investment vehicle, you could actually have $1,500,000 or more in your retirement funds. Now, it would be much easier to have a decent retired life and survive nicely for the remainder of your life on this $1.5 Million. Keep in mind that you won’t need to cash out this $1.5 Million at one go when you retire. You only have to withdraw what you need each month and let the remaining amount stay invested in your investment vehicle so that it continues to grow. Using this logic, you only have to withdraw, let’s say. $10,000 each month to take care of your monthly expenses, while the remaining amount stays and keeps growing.\u00a0\u00a0<\/p>

    Investment vehicle is the key here. And, the magic of compound interest and rate of returns is in play here as well. Stocks have given a steady 7-10% annual returns over the last 15 year cycle. Investing in Real Estate is another investment vehicle. And, of course, utilizing 401K investment options is going to be crucial. 401K plans allow US based working adults to set aside tax deferred funds. And, many employers also contribute towards their employees 401K accounts.\u00a0<\/p>

    To add cherry to the cake, there is a decent chance, that we may still receive Social Security benefits as long as the system is not bankrupt by the time we retire.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

    \n\t\t\t\t\t\t
    \n\t\t\t\t\t
    \n\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t

    2. How Inflation impacts Retirement plans?<\/h2>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t\t
    \n\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"Large-gains\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t\t
    \n\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t

    The overall increase in the cost of goods and services compared to the fall in the currency’s value is called inflation. Calculated at the\u00a0consumer price index<\/a>, it has seen an increment of 2% to 3% per year over the last few years.\u00a0Moreover, inflation for\u00a0<\/span>medical aids<\/a>\u00a0ranges from 2% to 5% every year. The impact of Inflation is extremely important as you plan for retirement, specifically, it helps determine the amount you would need to have available during retirement considering that the cost of goods could be much much higher than it is today.\u00a0<\/span>And, very often, changes in income and expenditure patterns are at the mercy of rising inflation.\u00a0<\/span>Hence, while preparing for a beneficial post-retirement life, a blind eye towards inflation can show staggering alterations in your plans.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

    \n\t\t\t\t\t\t
    \n\t\t\t\t\t
    \n\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t

    3. Do we have to pay Taxes during Retirement?<\/h2>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t\t
    \n\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\"Money\"\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t\t
    \n\t\t\t
    \n\t\t\t\t\t\t
    \n\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t

    Benjamin Franklin said, \u201c… in this world; nothing is certain except death and taxes.\u201d Well, taxes do summon the death of an individual\u2019s delight over income generation. It is a reality; for every purchase, there is a tax that has to be paid for every activity.\u00a0Post-retirement, you would undoubtedly have taxes on most accounts either from investment activity or from taxed withdrawals. Don\u2019t forget to count taxes during planning, as it may lead you towards extreme unexpected shortfalls.<\/span><\/p>