We know what Retirement planning is. Retirement planning means determining retirement goals and taking necessary actions for the same. You allocate revenue for your retirement days. This is done to remain financially independent during retirement years and not depend on anyone during the golden years.
One of our financial advisers, Venkat (NAME CHANGED TO PROTECT PRIVACY), tells us that there are stages to retirement planning. So we asked Venkat to explain it. Mr. Venkat will now take over for the rest of this article.
Hello everyone! I am Venkat here. I am a financial adviser who likes telling interesting things. We have already discussed what retirement planning is. So today I will talk about the different stages of retirement planning. It will be a fun read.
The different stages are:-
- Young Adulthood (21-35)
This stage starts with 21 for most of us but again differs from individual to individual though my colleague and I recommend it to start before 25. It goes on till the age of 35 so it covers at least a decade (10 years). People of this age won’t have much money for investment, but they have lots of time. They are at a huge advantage even if they invest tiny amounts of money regularly from now. The power of compounding works well for these people as time is their major asset. You have Public Provident Fund, National Pension Scheme, National Savings Scheme, Employee Provident Fund and even 401(K) plans to save for retirement and save tax. You can take more risks and earn more returns.
- Early midlife (35-50)
Lasting for a period of 15 years, this is when you start getting more responsibilities. You have to take care of aged parents, have to take care of the house, have to fend for your wife and kids, clear loans, etc. Your wife may or may not be earning. Your parents and kids will be too vulnerable and you would need to take care of their medical needs too. You need to have life insurance by now and continue investing in retirement schemes too. Keeping aside all this, it becomes hard to invest money. That’s why we recommend you to start investing by 25 rather than wait till 35. However, don’t stop investing. You can still invest aggressively however it is good to take moderate risk. If social security is available where you stay, find out more about it and start investing there also.
- Later midlife (50-60-65)
This is again a period of a decade (10 years) or 15 years depending on various factors such as your work status, how prepared you are for retirement, etc. Your risk taking should be moderate, not high. Continue investing in retirement programs like before. Continue investing in social security till you retire. Then, withdraw your retirement corpus and live happily till your eyes close for eternity.
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