However, during such a period, when you think you are finally free from hectic Monday mornings, busy work trips, last-minute deadlines, long meetings & pressure of targets, are you really free from the financial stress to keep your life on track especially after your salary stops? Not really. Unless you make smart money choices today with the right combination of investments & insurance tools while you are still in your prime earning years, your retirement becomes extremely stressful as you struggle to pay for day-to-day expenses, huge medical bills, your standard of living, leisure & entertainment activities etc. This blog is your go-to guide to start early with your retirement income planning, so that you can live life king size even after your monthly income from your job ends. Embrace peace of mind, comfortable lifestyle & financial freedom by knowing how to exactly plan for retirement the Ageas Federal way. Here are 5 ideal & practical tips to design a strong retirement plan that works for your life goals perfectly.
#1 Start early - The golden rule of thumb for retirement planning
Time is your best friend when it comes to your retirement investment plans. When you start early, you can lock low & affordable premiums for a longer duration, maximizing your policy benefits for retirement. This way, your monthly contribution - derived by using the retirement planning calculator online - doesn’t burden your cash flow condition at present. You are in a better position to manage other financial commitments - be it your everyday expenses, following your passion, financial obligations like loans & liabilities, your family’s needs (such as kid’s school fees) or any additional contributions required towards your term life insurance cover, child plan or savings plan etc.
To hit your target corpus, the best retirement plans in India, with the power of compounding, let your returns earn returns over time, giving you the excellent opportunity to reap a substantial wealth cushion when you need it the most after your working years. Let’s understand this with a sample illustration considering Niharika & Sid’s example. Sid starts investing Rs. 10,000 per month at age 25. Niharika starts the same investment at age 35. Assuming both earn an average return of 8% per annum, here’s what happens when they turn 60.
| Policyholder | Starting age | Monthly investment | Corpus at maturity |
|---|---|---|---|
| Sid | 25 | Rs. 10,000 | Rs. 1.48 crore |
| Niharika | 35 | Rs. 10,000 | Rs. 64 lakh |
Sid’s corpus at his 60 is more than 2x of Niharika’s maturity payout. The reason is simple - Sid started much earlier, i.e. at a young age. The time gap of 10 years in the starting age of the two policyholders has made this huge difference to the benefit from their respective retirement savings plans.
There is no perfect time to start with your retirement investment plans. And even if there is one, it is definitely ‘NOW’ - regardless of how much you can invest monthly i.e. Rs. 10,000, Rs, 5,000 or even Rs. 2,000.
#2 Calculate how much you will need in your retirement.
Before you find the answer to ‘How to invest for my retirement?’, you must first ask yourself this - ‘How much money do I need to retire?’ Underestimating or overestimating your retirement calculation can impact your retirement savings plan payout & premiums. When you underestimate how much you require, you may not have enough corpus when needed, therefore affecting your money choices during retirement to live life on your own terms. When you overestimate how much you need, your monthly contribution to meet that target goes up, straining your current finances. Factor in inflation & rising costs while picking the best pension plans in India. Consider all buckets of expenses like healthcare, medical emergencies, travel & lifestyle choices while using the retirement planning calculator to get an accurate figure. A good starting point is the 70% rule. About 70% of your last drawn monthly salary is required during retirement to maintain the same lifestyle. Suppose you are 30 years old, earning Rs. 80,000 per month & wish to retire at 60.
- Desired monthly income after retirement: Rs. 56,000 (70% of Rs. 80,000)
- Duration of retirement: 25 years (till age 85)
- Estimated inflation: 6%
- Expected return on investment: 8%
Your required retirement corpus could be approximately Rs. 3 crore.
#3 Diversify your investments - Don’t put all your eggs in one basket.
It’s always recommended that you diversify your investments to spread your risks wisely. Relying on only one source can impact your investments adversely if that particular instrument underperforms or doesn’t deliver to its full potential because of market-linked outcomes. Consider your risk-return appetite before choosing from the best retirement plans in India to build a balanced portfolio. A ULIP-based retirement plan provides the dual advantage of market-linked growth & life insurance, making it a smart choice for long-term wealth creation.
- Equity Mutual Funds or ULIPs: For long-term growth & inflation-beating returns.
- Debt Instruments (like PPF, NPS, Bonds): For stability & safety.
- Life Insurance Plans: For protection & disciplined savings.
- Pension Plans / Annuity Plans: For regular income after retirement.
Suppose you have Rs. 10,000 to invest every month, one way to divide it is by taking 50% (Rs. 5,000) for your equity-linked plans (ULIPs or mutual funds). Use 30% (Rs. 3,000) towards debt or fixed-income plans & remaining 20% (Rs. 2,000) can go into retirement or pension plans for guaranteed returns. You can even alter this ratio (50:30:20) as you grow older. In your 20s & 30s, you can take more risks & be more aggressive with equity options in your investment. Whereas, in your 40s & 50s, you can shift focus towards safer, income-generating instruments for a conservative approach.
#4 Protect your savings with the right life insurance cover
Unfortunate events like death, medical emergencies & financial setbacks can erode all your hard-earned savings in no time. An ideal life insurance cover ensures that even if something untoward happens to you, your family’s financial future is protected at all costs. Consider having term covers, health insurance policies & critical illness riders in your financial plan to protect your savings. Your retirement fund can therefore continue to grow steadily even in the face of unexpected events.
#5 Manage & modify your plan regularly to suit your evolving needs
Once set, your retirement plan cannot be forgotten completely. It needs constant monitoring; your portfolio needs to be reviewed periodically for alterations as required in the choice of investments & fund allocation so that it can be tailored to meet your changing financial preferences over time. Your retirement investment plans need regular intervention to ensure they are not too far from your retirement goals. Your retirement savings plan must be adapted to suit your financial needs over the years as inflation rates, interest rates & life events (like marriage, buying a home, or children’s education) continue to impact your savings potential & financial capacity. For instance, your contribution towards your retirement income planning can increase proportionally if your salary too has increased with time. You can rebalance your investment with increased debt funds (compared to equity exposure) as you near retirement for added security, minimizing shocks from the market. If you start investing Rs. 10,000 monthly at age 30 & increase it by just 10% every year, you can potentially grow your corpus to Rs. 4 crore instead of Rs. 2 crore, simply by aligning your savings with your income growth.
Bonus Tip:
Avoid the temptation to withdraw early. Even if your short-term goals require you to get funds from all sources, your retirement investment plan must not be utilized for the same. Instead, use from your contingency reserve for such sudden needs while protecting your retirement savings plan no matter what. Retirement funds are dedicated towards one purpose & that is for your worry-free financial comfort during retirement. A solid retirement plan is the financial foundation for a great innings - be it to build a quiet home in the hills, spend time with family, or explore the world - so that your dreams don’t have to retire when you do. Live an emotionally fulfilling life with a range of thoughtfully designed best-in-class retirement plans from Ageas Federal Life Insurance.
- Guaranteed Lifetime Income Plan
- Saral Pension Plan
- Golden Years Pension Plan
