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Three Ways to Build a Retirement Plan that Grows

The retirement that you’ve always wished for won’t happen on its own. Unless you’re independently wealthy, or have a wealthy benefactor, it takes discipline and thought to save up for and plan retirement.

Planning takes much more than one act, one decision, or one goal. It’s a lot of actions that evolve over time, ending with you in the position that you designed and brought to life. You are the architect of your own retirement, so it’s up to you to make your savings grow.

1. Start Now!  However Old You Are!

If there’s one piece of advice that you’ll hear over and over, it’s to start your retirement plan as early as possible. That’s a logical course, but not all of us are young and diligent. If you are young — do be diligent:  The sooner you start saving the more time you’ll have to save, and the more money you’ll likely have once you retire. But starting early has other benefits. You can save less as you go, and it will have more time to grow as long as you make your money work for you.

You’ll have plenty of avenues for saving. Employer-sponsored 401(k) plans and the many different IRAs take your pre-tax earnings and tuck them away to grow until retirement. As for your portfolio, the possibilities include stocks, mutual funds, ETFs, annuities in all their forms, bonds, and many others.

2. Don’t Be Afraid of Investing

When you start young, higher risk investments shouldn’t be scary, even though the market goes up and down on the short term like a yoyo. There’s always the possibility for loss, but there’s also time to make up for losses before you retire.

Market Watch explains that even with all of the regular ups and downs, practically every 10-year period shows growth. In fact, the only widespread losses in any 10-year period happened in the 1930s. Every decade thereafter shows growth, with the exception of a .9 drop on the S&P 500 Index between 2000 and 2010.

Higher rates of return make risky investments worth it. And they’re not as much of as risk as it seems when you step back and examine the overall patterns.

If you are older, you will want to choose investments that will at least keep pace with inflation, but you probably do not have the time to recover from extreme lows in the stock market.

3. Reevaluate Your Progress Regularly

It’s one thing to design a great plan, but it’s something else to keep it that way. Times change, in nearly every way imaginable. And what’s important to you now might not be in 5, 10 or 20 years.

Reevaluation, says Investopedia, is critical to Retirement Plan Company. You need goals to strive for, but you also need the flexibility to change those goals as you go along.

A retirement calculator is a valuable tool for gauging progress and reevaluating goals, which is another critical element of a good plan, according to Investopedia. With a calculator, you can see where your money works best, check on how well your plan is performing, and even get suggestions on making it stronger.

[Source: http://www.newretirement.com/blog/2015/06/16/3-ways-to-build-a-retirement-plan-that-grows/]

Here is how you can save big money for your retirement

Retirement planning is an inherent part of financial planning process. Although it is considered as very critical goal still most of the times people do not keep it on priority while saving. You may be a 25 year old professional just starting your career or a 50 year old nearing retirement, retirement planning cannot be overlooked. Government sector employees get regular pension after retirement. 

However, private sector employees and self- employed individuals have to prepare for their golden years. Therefore, importance of retirement planning is increasing day by day for an individual. The pre-retirement phase which is also known as ‘accumulation phase’ can be used to plan for retirement with various products available in the market. The proportion allocated towards retirement planning in a plan depends upon many factors such as, current standard of living, expected inflation during post retirement phase, expected rate of return from the investments. Let us discuss various products which can be used to invest wisely for retirement planning.

1. Pension plans of Mutual Funds: Mutual funds are the best way to plan for retirement. They offer liquidity option with minimum charges and are successful in creating long term wealth. Till now only three mutual funds companies offer pension plans, they are – Franklin Templeton, UTI and Reliance Mutual Fund. While Franklin and UTI offer Debt oriented plan with only 40% equity exposure, Reliance offer equity oriented plan with 60% minimum of equity exposure. The amount invested is eligible for tax exemption under Sec 80 C. Also the exit load is high to discourage investor to withdraw funds and stay invested for long term.

2. Provident Fund: There are two types of provident funds available in India - Public Provident Fund and Employees Provident Fund. Both are popular means to save for retirement. Employees Provident Fund (EPF) is only for employees of an organization wherein the contribution is deducted from the salary of the employee. Employer also contributes into the funds up to the limit as prescribed in the act. Employee can redeem the fund once she is out of job after obtaining NOC from past employer.

3. National Pension Scheme: NPS is a defined contribution based pension scheme launched by the government. The scheme is compulsory for government employees and optional for private employees and self-employed. Any Indian Resident between the ages of 18-55 is eligible to invest. The scheme is structured into two options:

a) Tier – I account: This account is mandatory for all government servants who will make a contribution out of his salary and government will also make an equal contribution. In case of private sector employees there will equal contribution from his employer. The withdrawal is not allowed before retirement age i.e. 60 years. The amount invested into this account qualifies for deduction in Income tax.

b) Tier – II account: This account is optional for government employees in which there will be no government contribution. Private sector employees can also invest into this account. This account permits withdrawal prior to the retirement age. No tax benefit is available on investment in this account. However, to open this account an investor needs an active Tier-1 account.

4. Pension plans of Insurance: Many insurance companies have launched retirement pension plan which aim at providing pension to the insured after retirement. There are two types of pension plans – unit linked pension plans and traditional endowment plans. 80% of the pension plans in the industry are endowment plans. However, planning retirement with the help of an advisor is recommended as different people have different risk profile and lifestyle to support savings towards this goal.

[Source: http://www.moneycontrol.com/news/retirement/here-is-how-you-can-save-big-money-for-your-retirement_1286681.html]

Plan Your Retirement to Secure Your Golden Years

India has one of the highest populations of youngsters, and with each passing year, more and younger Indians are joining the workforce. At the same time, India is expected to have a population of over 200 million who will be above 60 years in 2035. This section of the population will need to be able to financially support itself as the cost of living and lifestyles change.

As individuals are expected to live for 15-20 years post retirement, it becomes essential for an individual to financially secure his golden years. Added to this is the rising medical cost, which is running way ahead of the normal inflation, and the breakdown of the joint family support system.

Most working individuals in their early thirties may not even think of a life after retirement. By the time they get into their forties, the thought of retirement settles in and then begins the planning - one of the key challenges here is to make up for the time that is lost due to lack of planning early.

For example, if an individual spends Rs 25,000 a month today, at an inflation of 7 per cent, the expenses after 25 years would increase to Rs 1,36,000. Add to this medical expenses, which increase with age and other expenses - the monthly expenses could actually exceed Rs 1,50,000.

Retirement plan is a systematic process, the earlier one starts, the better it is, as this gives one the opportunity to regularly save to build a corpus. The benefit of time coupled with the power of compounding helps to create a substantial retirement corpus.

There are two key phases in the retirement planning activity - the accumulation phase and the annuity or payout phase. In the first one, the individual contributes a certain amount regularly. The annuity or payout phase is when the pension is paid out. The age from which one starts receiving pension is called as the Vesting age.

HOW MUCH DO I NEED?

A systematic approach makes it easier to estimate the amount required after retirement and accordingly select an appropriate financial savings instrument.

Calculate: Based on the current expenses, calculate the amount which will be required to financially support oneself and the family, after retirement. Companies offering pension products have retirement calculators on their websites which can help one to calculate the quantum of money required post retirement for financial independence.

Save: Regularly start saving a predetermined amount of money that will help you build the desired corpus for life after retirement. It is advisable to put aside a portion of your income as savings before expenses, rather than saving what is left after expenses.

PUBLIC PROVIDENT FUND: 

Public Provident Fund is a 100 per cent debt-oriented investment, guaranteed by the government of India. A minimum contribution of Rs 500 a year is mandatory. This product has a lock-in of 15 years. Partial withdrawals are permitted from the sixth year subject to certain conditions.

While EPF and PPF have been providing returns ranging between 8.5 and 9 per cent (the current returns for 2014/15 are 8.75 per cent and 8.70 per cent for EPF and PPF, respectively), the other pension products have provided higher returns primarily due of the exposure to equities. The below table depicts the performance of equity markets, the probability of positive returns and the expected returns from a regular annual investment of Rs 20,000 in equities.mosimage

EPF and PPF are tax free on maturity. For NPS the entire proceeds are taxable. Maturity amount of unit-linked plans are tax exempt provided the sum assured is 10 times the annual premium. An individual needs to ensure that their retirement planning portfolio comprises of a mix of products mentioned above. The key is to start early, make regular contributions and remain invested till retirement age.

[Source: http://businesstoday.intoday.in/story/investing-tips-for-retirement-planning-icici-prudential-exec/1/217806.html]