Retirement is an important and inevitable phase in every working individual’s life. It comes with significant changes while you enter a life of not working for money. Without a proper plan, the transition can be overwhelming and may also cause unnecessary financial pressure. This is because the primary source of your income halts, but your life continues on, and so do the expenses that are a part of it.
Individuals who have never retired before will not know what retirement feels like. When you are planning your retirement, there are some facts that you need to take into consideration. These factors shed clarity on the topic by providing important pieces of information. Here are 8 key factors about retirement planning:
1. Target financial freedom
Back in the day, people used to plan their retirement, keeping age in mind. Whereas now, individuals retire when they achieve their targeted financial freedom. Financial freedom implies that you have sufficient funds and passive incomes to sustain the rest of your life when you stop working. It should cater for your everyday expenses and also meet any goals that you have.
2. Things to do after retiring
You may have some things in your mind that you may have always thought of doing when you retire. It can be travelling, going for a dream holiday, finding a new hobby, or moving to a new place close to nature. While using a retirement calculator, do factor in the expenses that your goals after retirement may entail. This ensures that financial problems do not stop you from living your best life.
3. Different financial instruments
Retirement requires a need of regular income from your investments. The need for liquid assets grows. Some products that retired individuals choose are senior citizens’ savings schemes, lesser real estate, and maybe annuity, if you are ready to understand the complexities. Use tools like a retirement calculator to plan your retirement.
4. Asset Allocation post-retirement
When your life changes, so does your asset allocation. When you were young and had fewer financial commitments, it was easy to have an aggressive portfolio. These portfolios usually include high-risk -high rewards investments. With a retirement plan, you can choose to invest in assets that offer recurring interests and dividends that form a regular source of income. You also need to evaluate the assets that you want to leave for your family, be it a stock portfolio or a real estate. Most of your assets must be invested in secure instruments to ensure a stress-free retirement.
5. Factor in your healthcare
When you are employed, the employer might have covered your health insurance. However, once you retire, you have to take care of yourself. This means that if you do not have a health insurance plan, you should buy a comprehensive one. This ensures that in your retirement years, your healthcare is protected. If you encounter a serious illness in the early years of your retirement. You may need a health cover or a medical corpus that takes care of the expenses.
6. Access your portfolio
There is no set rule of how your portfolio should appear after your retirement. However, with your retirement plan, you want to ensure that there are sufficient funds in assets that are not volatile. This ensures that you do not face any financial turmoil because of risky investments.
7. Life insurance as legacy
When you were earning and had dependents, life insurance was a must, as a financial backup in your absence. It ensured that in case of your sudden loss of life, your family does not suffer financial turmoil. Once you have retired, your family may probably be self-sufficient, while you may be free of debt. However, if you have dependents or any liabilities, life insurance makes financial sense. While if you have sufficient assets for your retirement needs, life insurance is just a legacy that you leave behind for your loved ones.
8. Retirement regrets
If you are young and planning your retirement, it is important to know the regrets of the ones who retired. Several individuals usually regret not buying life insurance or health insurance beforehand. This is because the older you are, the higher your premium. There are also many who wished they had worked more in their life. It is important to assess, while retirement planning, whether you are retiring for the right reasons.