By Santosh Joseph

Have you ever thought about the lifestyle you would like to have after retirement? Most of us have envisioned how we would like to live our lives during our golden years. However, in order to achieve this dream, it is crucial to plan ahead and save enough money. Retirement planning involves thinking long term and starting early.

Retirement is a stage in life where your active income or employment comes to a halt. Your typical 9 to 5 job or full-time role will eventually end during retirement. While most people are aware that they will have a reduced income post-retirement, they often forget to consider the impact of inflation or unforeseen emergencies such as medical conditions and sudden family emergencies. These are risks that many people fail to factor into their retirement planning.

Even if you have a contingency plan in place, the question remains: Is the amount you have saved enough to cover all your expenses? Sometimes, medical costs may exceed what you anticipated, which may require you to dip into your retirement income or even your retirement corpus. It is important to find ways to overcome these challenges and ensure that you have enough financial security to live the lifestyle you desire during your retirement years.

The importance of starting early

The general rule of thumb when it comes to saving for retirement is that the earlier you start, the better. By starting early, you can benefit from the power of time, even if you can only contribute a small amount of money initially. Over time, the value of your contributions can compound and grow significantly, which is a critical aspect of long-term saving.

Through the power of compounding, you can potentially accumulate more money than what you initially save. This is particularly important when it comes to retirement, as starting early can allow you to accumulate and grow your savings over time. By starting early, you can take advantage of this compounding effect and potentially enjoy greater financial security in your retirement years. So, the sooner you start saving for your retirement, the better it is for your financial future.

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If you’ve already not planned for retirement, you should give retirement planning a serious thought and assess your situation. For many people in the private sector, there is no concept of retirement.Therefore, you need to consider that post active working life, there may be very less income in a normal course and you have to really plan for retirement corpus as well as retirement income from the corpus most probably after retirement. If you haven’t got a corpus already, it’s better to start and it is better late than not doing it at all.

Few Do’s and Don’ts

* Don’t waste any further time, start immediately. If you have not started investing and if you are at your retirement stage, then you have to cut down or resize your living expenses. The pandemic has taught us all one lesson – lifestyle is expensive but living is not. Many people are able to live at a portion of what they would typically spend monthly because many entertainment and other costs have gone down. You may have to cut down on those expenses and be aware and careful of all unwanted expenses so that you live within a certain budget and ensure your corpus is not dipped into in the starting few years of your retirement life. Secondly, ensure that your corpus is prudently and smartly invested so that it can give you that extra edge in case of an emergency or a contingency.

* You may have to consider a slightly higher amount considering you are starting off slightly late.

* You may also have to consider ad-hoc top ups or penny-pinching in your day to day or monthly expenses to see if you can allocate more money to retirement as the years progress. For example, you may start with a certain amount and every following year when you have an increase in salary or when you have more savings, try and start putting away money consciously towards retirement.

* Since you are starting off late, you could maybe tend to move into a slightly more riskier portfolio so that portfolio being a little more aggressive tends to benefit with slightly higher return on the overall corpus. Otherwise, the blueprint or the thumb-rule remains the same – start early, save as much as possible and also accumulate as much as possible apart from the regular monthly savings so that you have a very robust corpus which can take care of you in your post-retirement time.

(The author is CEO and Founder, Refolio Investments and Germinate. Views expressed are his own.)