Getting old means one has to get retirement from his job. Retirement is an important phase no one can ignore; many people have retirement dreams. So, it's important to start saving now if a person wants to fulfil his dreams and live happily ever after. The first step is how much a person should save to reach a retirement goal; many people get stuck at this question.
According to the thumb rule of savings, one needs to save 15% of one's pre-retirement income if taken to assume that a person has started saving at 25 to 67 years.
15% may seem a lot of your income, but if a person has a savings account with the employer, it counts as a person's annual savings. Is 15% enough? That solely depends on choices one makes before retiring and most importantly, when he starts saving. Any other source of income like pension should also be considered.
Six Ways to Save Better for Retirement
Step 1- Start Early, Save Better
The earlier you start, the better it is. Early savings means a person's investment has time to grow through all the market's up and downs.
It may seem futile to save when young, and when retirement is far away, but when young a person has time to start saving, the investments also have time to grow and every penny saved equals every penny earned.
Step 2- Delay Retirement as much as Possible
The thumb rule that is suggested requires a person to work till the age of 67 because that is the age after which people are eligible for social security benefits. But if a person wants to retire early, he needs to save more.
Learn more about saving and investment plans.
Step 3- Increase Savings by 1% Every Year
1% may seem very less, but after 30 years of retiring, he will see the benefits. For example, if he is 20 and increases 1% of his savings, his total savings are increased by 3%.
Step 4 – Review your Investment Portfolio
A fall and an increase in the market can affect the investment a person has. If he has invested too much, it can shift him towards risks, too less invested in stocks won't benefit him. So, one needs to be sure that he has a mix of investment. A regular check is needed on his investment to ensure he has the right amount of stocks, bonds, to meet his goals.
Step 5- Consider the Style of Investment
It is important to keep regular checks on investment if a person doesn't have time to opt for a managed account. If a person has a managed account then, professional managers do the job. A person can pick the level of risk he is willing to take.
Step 6- Make Savings a Priority
Among the various priorities a person has like a house, children, parents, he should make retirement his priority. Be sure to save at least 15% of the income every year.
Four Retirement and Pension Plans for Senior Citizens
To take care of your post-retirement expenses, you can put your money into different saving plans and schemes. These plans come to provide a person with a normal salary after retirement. Considering the regular inflation investing in a retirement plan has become necessary. The best pension plan will support the old aged when all other income wells dry.
1. Deferred Annuity Plans
This allows a person to accumulate an amount by either regular payment or premium payment over a tenure. When the term is over the amount is handed to the person. This scheme provides tax exemption benefit, although only one-third of the withdrawn amount is tax-free. The amount invested in the deferred scheme is locked and cannot be withdrawn at times of emergency.
2. Immediate Annuity Plans
In this scheme, a policyholder can be instantly provided with the pension with the payment of a required amount. A person can choose from various options in an immediate annuity scheme, and the premium paid is tax exempted under the Income Tax Act, 1961.
3. National Pension Scheme
The government of India introduced this for securing the future of the old aged people. The policyholder can choose to invest in equity and debt funds for ensured returns on the investment. The holder can withdraw at least 60%, and rest is used to purchase an annuity.
4. Guaranteed Income Plan
In this pension plan, an amount is provided for a certain period like 5 years, 10 years, 15 years, whether the insured lives till that time or not. You will get an avenue to build a retirement corpus along with a life cover. This plan offers regular, guaranteed income after retirement.
These life insurance plans ensure a better future after a person retires. A person can opt for any one of these monthly income plans for senior citizens to avail assured benefits. Prepare for the wellness of your golden years.