Saving for your retirement will always be a benefit that everyone should know, but many people may not be sure how to do it and at what age to start. If you are still wondering about the same then in this article, we will tell you what is the best way to save for early retirement and how much you need to save for retirement.
How much to save for retirement?
The main objective of people to save money after retirement is to ensure that they do not face money crunch. This means that if you want to travel in your old age and want to spend for your day-to-day activities then you don’t need difficulties to spend.
How much you’ll need to save will depend on how you want to spend your retirement. It is not limited that you need to save the mandatory amount. It totally depends on you how wonderful life you want to live after retirement. It’s always a good habit to save money for your future.
According to some financial planning experts, you will need to save enough so that your retirement income is between 70% and 80% of your pre-retirement income. There are many personal finance software available that manage your money in a proper way. You will need a higher percentage if you plan to improve your standard of living. If you have more retirement expenses than you did before retirement, your retirement income may exceed your pre-retirement income.
In human life, every person needs to ask himself the following questions regarding his retirement
Ways to save for retirement
When you plan your finances in advance for retirement, you can enjoy the same lifestyle after retirement without compromising on your leisure, entertainment, travel and hobbies. So, start planning your retirement as soon as you start earning. However, just saving is not enough, you should make a plan to grow your savings even after retirement.
1. Start investing early
In your life the most important thing you can do is start saving early. However, it is needless to say that starting your retirement planning decades before your retirement age will help you save more and with ease. It is better to start your financial planning for retirement in advance when you are between the age of 21 to 30 years old.
If retirement is decades away, it can be difficult to think about or care about. “But when you’re young is the right time to start saving for retirement. Even though saving for the future can be a challenge, letting your savings grow over those extra years can make the struggle worth it—with every little bit of help you can save.”
2. Delay retirement
Our 15% savings rule assumes that a person retires at age 67, when most people will be eligible for full Social Security benefits. If you don’t plan on working that long, you’ll need to save more than 15% annually. All things being equal, your required savings rate may be lower if you plan to work longer.
3. Invest as per your goal
Before your retirement set your goal. Think before what you want to achieve or do after retirement as your goal. The goal is obvious depends your life style. These can be buying car, spending vacations or pursuing your hobbies.
Always remember that there is no source of your income post retirement which money you have saved or your retirement plan is going to help you. Then there are the emergencies and responsibilities that you need to keep in mind while planning your retirement corpus. These can include your child’s wedding, hospitalization and medical expenses for you and your family, and even the cost of home renovations and repairs.
A better investment plan and pension plan will help you to accomplish your list of goals in future.
4. Think about your investment portfolio as you age
Build an investment portfolio based on your financial situation, your risk appetite and your retirement timeline. Depending on your risk appetite, you can diversify your portfolio and include equities, debt schemes and mutual funds or invest only in assured return instruments like FDs and PPF.
Experts say that ideally you should save at least 10% of your monthly income from the time you start earning. Thus, you can split this 10% across different tools to grow your wealth.
5. Automate your savings
The best way to save for retirement is to pay yourself first. Always save a small amount from your monthly salary. It is better to auto debit it as a monthly routine process and believe me at your retirement age you have saved enough money to spend after your retirement to spend for your goal.
Saving money is something that most people struggle for. Use proper guidance to invest money in various government policies, investment plans, or private company policies. There are tons of budgeting tools and apps out there to help people analyze their spending, and that’s great.
6. Invest in government schemes
Buy government bonds to earn at least 8% on your investment over a period of 10-15 years. Alternatively, you can invest in the National Pension System (NPS). Government of India sponsors this tax-efficient flexible pension scheme. Thus, the interest return on your investment is assured and high in case of NPS.
Also, you can claim an additional Rs 50,000 on account of your NPS investment along with the regular Section 80C claim under the Indian IT Act. Also, you can invest in immediate annuity plans through insurance companies. The distinguishing feature of these plans is that it pays you a fixed pension without a fixed tenure for the rest of your retirement life.
7. Regular income plan after retirement
To earn regular income after retirement, you can invest in some government schemes and enjoy its benefits after retirement. Monthly Income Schemes (MIS), Pension Schemes and Senior Citizen Savings Scheme (SCSS) are some of the top schemes that will help you earn income in the form of pension or high returns after retirement.
What percent should you save for retirement
When saving for retirement, most experts recommend an annual retirement savings goal of 10% to 15% of your pre-tax income. Higher income earners generally want to get to the top of that range; Lower income earners can generally be closer to the bottom because Social Security can replace more of their income.
But there is no specific formula to figure out how much you should save for retirement. More than likely, it will depend on parts of your future, both known and unknown, such as:
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Your life expectancy
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Your current spending and saving levels
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Your lifestyle preferences in retirement
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