A working person spends his entire life working, but there comes a time when the body demands rest. We call these days of rest retirement. The biggest question is that when the salary coming every month stops, then how will your regular expenses be managed? If you have not yet started saving money for your future, then you need to think about your strategy immediately. Deciding the right fund size for retirement may sound simple, but it is a complex mathematics. The amount that seems adequate to you today will be worth much less in the coming 10 to 15 years. Therefore, it is very important to take steps in the right direction at the right time.
Today’s savings will be useful tomorrow
Inflation rate is that invisible aspect which continuously reduces the purchasing power of our money over time. This can be understood with a simple example. Suppose today your family’s monthly expenses can easily be covered by Rs 45,000. If we assume an annual inflation rate of 6 percent, then after exactly 20 years you will need more than Rs 1 lakh every month to maintain the same lifestyle. That is, if investment is not made then in future your money will prove to be very small in front of inflation.
Heavy burden of treatment on relief from EMI
Most people fail to accurately estimate their future expenses. After retirement, your financial needs will not be the same as today. Some expenses will be out of your budget forever. For example, by that time the huge burden of paying the house EMI would have been lifted from your shoulders. But, along with this, there is also a truth that with increasing age the expenses related to medical and health care will increase rapidly. Giving prominence to health expenditure in the new budget is a wise step.
At least twenty-five years of preparation
A common mistake is that people are not able to correctly estimate the age after retirement. The longer you live, the more money you should have to survive. If a person retires from work at the age of 60, he should prepare a complete plan of his regular expenses for at least the next 25 years. Without this long-term preparation, one may face financial crisis at the last stage of life.
Right choices will give you full benefit of compounding
There are many great options available in the market to make old age financially secure. If you are salaried, Employees Provident Fund (EPF) is already a natural part of your planning. Apart from this, schemes like Public Provident Fund (PPF), National Pension System (NPS) and Mutual Fund can be chosen. Financial experts clearly believe that the earlier you start your investments, the more scope you have to build a huge fund. By maintaining investment for a long period, you get the direct benefit of the power of compounding i.e. compound interest.
Read this also- EPFO Alert: When can you withdraw full PF and when will you get only 75%? Know the complete rules
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