Pension planning is important for every individual. It needs to be considered by everyone at an early stage in their professional lives. The last few years of a person’s life need to be spent away from the struggles of life. This is why it is important that you do not have a financial burden after you retire. A pension calculator becomes a very important tool while planning for your pension. Let us take a look at the 6 things you need to know about when it comes to pension planning.
- Make sure that you make a retirement budget
Since you are the best person to know your expenses, you will know how much money you would need to survive on a monthly basis. If you consider inflation as well, which is somewhere around 5% on average in the country, you will need a lot more money to survive than you require right now. You can find out your expenses by collecting all the bills and expense receipts over a month. You can look at electricity bills, telephone bills, restaurant bills, and credit card bills. Also, you will need a good pension calculator.
- How much risk are you willing to take?
Are you an aggressive investor? If you are an aggressive investor, you would not mind putting lots of money in the equity market. The equity market can get you amazing returns. If you are a conservative type, you could probably settle down with a low income. The risk appetite of an individual plays a huge role in determining retirement plans. You can pick among the pension plans in India by studying the portfolio and checking if it sits well with you.
- What will your income source be after retirement?
When you retire, your monthly salary would not be credited into your salary any longer. So you would need to find other sources of getting a continuous income. One of them is a pension from the employer. If you have an extra home, you could put that on rent or you could even be hired as a guest faculty in an educational institution. These sources of income could help you save money for unexpected expenses. You could even make systematic redemptions if you invest in good pension plans in India.
- How much time do you have before you retire?
You should have an idea of the approximate age when you would retire. The difference between that and your current age is the amount of time that you have to build a retirement corpus. If you do not have a lot of time to create a corpus, try investing in equities. Even if they have carried higher risk, they offer better returns. If you would like to stay away from equities, you should consider investing in mutual funds as an alternative.
- It is never too late to start investing
If you are a late bloomer, you will find that saving for your retirement would seem a little tough. You can start your retirement planning at any age. However, the earlier you start, the better it is for you. However, if you start late, make sure that you save every bit you can.
- It is very important to stay off debt
Another thing you need to know about pension planning is that you need to stay off debt as much as possible. As you are nearing retirement, you would not want to owe anyone any money. Paying off debt might be easy in your early years, but not when you are about to retire. Make sure you have paid off every loan well before your retirement.