Listen to the article
What Is Pre-retirement Planning In India?
We are no stranger to the “the early bird catches the worm” proverb. But did you know that this applies to retirement planning too? Retirement financial stability does not happen by itself. It takes planning, dedication, and, yes, money. Retirement planning necessitates a rigorous approach, but early retirement necessitates even more discipline.
Share on facebook
Share on twitter
Share on linkedin
Retirement is frequently associated with old age. However, with many young individuals opting for early retirement in recent years, this phrase has taken on a new connotation. The new retiree generation is leaving employment and settling into retired life in their early 50s. As appealing as the thought of not working and living a peaceful lifestyle seems, it is a challenging objective to fulfill. The sooner you retire, the less time you have to save and invest for a comfortable and secure post-retirement life.
Also read: The Simplest Guide to Retirement Planning You’ve Ever Heard.
Retirement meant hanging up your boots at the age of 60 just a decade ago. Today, Indians are not afraid to take a permanent hiatus from employment in their late forties or early fifties. This shift gets driven by two factors: millennials adopting the FIRE idea and preferring activities to merely working to the end of their lives. The FIRE idea denotes a decision to pursue financial independence and retire early. It gets fueled by millennials actively seeking work in the private sector. It is different from their predecessors, who mostly are government employees with fixed retirement ages. Starting a business or traveling has taken center stage, and many Indians are trying to retire early to follow their interests with ease.
However, retirement planning is more than just saving money. According to a recent poll, the present generation of Indian retirees regrets not saving enough money in their lives. In addition, people who are presently planning for retirement anticipate saving for at least six years longer than their predecessors. Proper retirement planning should take into account both financial and psychological requirements. Retirement planning is also important since Indian demographics show an increase in life expectancy, an increase in nuclear households, and the absence of a social security system. Nonetheless, retirement accounts constitute only a modest portion of total savings.
Also read: Best Retirement Plan for NRI in India 2020 – Retirement Planning for Future.
So, what defines pre-retirement planning?
Retirement planning entails planning ahead of time for your future life so that you may continue to achieve all of your goals and objectives on your own. Setting your retirement objectives, predicting how much money you will need, and investing to increase your retirement savings are all part of this process. Pre-retirement planning is a goal-oriented process in which people make efforts to prepare for their retirement life. This process allows retirees to form realistic anticipation of the changes during the transition. It also helps them establish a long-term aim for living after retirement. Pre-retirement preparation is a broad word, such as self-perceived retirement readiness.
What is the value of Pre-retirement planning?
The majority of individuals adore the goal of becoming financially independent and living a quiet and pleasurable life in their elderly years. It necessitates significant funds and a well-thought-out retirement strategy. During your working life, you can cover your regular costs with your wages. But, after retirement, you will need to pay for your expenses for at least 30 to 35 years because there will be no source of regular revenue.
Retirement planning is particularly vital because the average life expectancy in India continues to climb, working forever is unrealistic, and you may have to stop working due to health or other reasons at some time. Furthermore, medical expenditures, which will account for a sizable amount of your retirement spending, are on the rise.
Consider the following example: a 30-year-old with current monthly costs of Rs. 50,000, will require about Rs. 2,87,174 per month to fulfill his expenses when he is 60 years old (considering inflation at 6 percent ).
What are the benefits of pre-retirement planning?
Now that we understand the value of pre-retirement planning, let us dwell more on how it can benefit you. These seven advantages of early retirement preparation may entice you to begin your retirement planning as soon as feasible if you do not already have one.
- Tax-free: One of the most significant advantages of having an early retirement plan is the tax benefits. You may save money on taxes by investing your earnings in implausible retirement plans. In addition, retirement plans allow you to diversify your tax payments.
- Safeguarding of assets: You do not need to sell your assets to increase your retirement income. You may avoid relying on your possessions by investing in a retirement plan. As a result, early retirement planning can help you safeguard your future.
- Better returns: You gain less advantage from putting your money in the bank. However, investment alternatives allow you to enhance your profits by providing higher returns. Thus, investing in retirement plans yields a return than investing in a bank.
- Compounding value: We all believe we can construct a sufficient retirement fund by saving a portion of our salary. However, because we do not account for inflation, that is an ineffective approach. The power of compounding contributes to a larger retirement corpus.
- Curbs unprecedented expenses: A retirement fund can assist you in surviving unexpected medical emergencies. Having a retirement plan allows you to access cash as needed. Remember that as you become older, your medical bills will inevitably arise.
- Aids to the dependants: You can support your dependents if you have a solid strategy in place. Retirement plans provide financial stability to your dependents by acting as a financial buffer. With careful financial preparation, you may assure that there is no income loss after retirement.
- Maximum benefits: To get the most out of your retirement plan, you must start early. Beginning to invest in your early twenties is the option for an early retirement strategy. It extends the tenure and allows you to pay lesser rates. However, if you start in your late twenties or early thirties, you may make a difference by bridging the gap. Determine your retirement age and needs, and then begin saving in a retirement plan.
Now, what are the best pre-retirement investment options?
When preparing your retirement funds, you must take into account issues such as monthly spending and inflation. Begin investing early to plan for a well-funded retirement.
Also read: Retirement Portfolio 101: 7 Investment Options You Must Include.
There are several fantastic pre-retirement investment opportunities that you may invest.
- Real estate: Real estate investments provide a dual advantage of capital appreciation plus continuous rental payment flows. As a result, they are an excellent retirement investment since the rental income replaces the monthly payments up to a set proportion. Furthermore, the leverage to acquire real estate can help you save taxes by deducting the interest payment on let-out properties. It can also assist and increase contributions to the Corpse retirement investment fund. One can also invest in fractional real estate ownership for pre-retirement planning.
- Stock market: The equities asset class is the riskiest, but it also has the potential profits. This risk gets mitigated by distributing funds over a lengthy period. Individuals with less financial responsibility can invest a number of their assets in the stock market. Those with financial responsibilities can invest a lesser percentage in the stock market to hedge against volatility.
- Mutual Funds: In retirement planning, mutual funds are the most popular asset class. With the benefits of monthly investment plans, long-term parking of assets handled by specialized asset managers, and diversification options within the fund into equities, debt, and money market, they may deliver average returns of 8 to 15%. Mutual funds’ compounding impact is the most important aspect of long-term fund multiplication.
When your anticipated retirement date is a decade away, it may appear remote. However, pre-retirement planning is an important step to ensure you financially prepare for your golden years. It is critical to plan wisely and establish reasonable objectives so that time works in your favor and you have the resources to enjoy the retirement you have always desired.
Even if you began saving and investing for retirement late or have yet to begin, it is essential to know that you are not alone. There are actions you can take to enhance your retirement savings.
Also read: 5 Retirement Strategies to Keep in Mind as a Late Starter.
Assetmonk is India’s fastest-growing wealth-tech platform that curates real estate assets that will help you sort out your retirement plan. The assets generate steady passive income and returns in the form of capital appreciation and rental income. Visit their website to explore real estate investment opportunities starting at INR 10 lakhs.
Early Retirement FAQ’S:
Is early retirement a good idea in India?
Early retirement seems appealing, but it also implies that, due to financial commitments, you will have to quit working at the age of 40 or 45. According to industry experts, without sufficient preparation, it is nearly impossible, at least in India. Thus, detailed pre-retirement planning is important.
What is the procedure for early retirement?
The procedure for early retirement are as follows.
- Early planning
- Investigate your retirement budget.
- Set a retirement fund target.
- Begin saving as soon as possible
- Invest in Financial Instruments That Meet Your Requirements
- Purchase Health Insurance
- Reduce Debt
Related Articles
Financial Goals For Real Estate Investments In Your 40s
The 40s bring with them a plethora of financial complexities. But, how do we meet these financial complexities? Through goals! Goals are what keep you going. Goals propel us ahead in life. Financial goals, to be specific here. So, what are these financial goals that a 40-year-old Joe must set for real estate? SMART goals!
How Can Indian Investors Use The Untapped Power of Asset Management
Asset management is intended to cultivate market value for ownership to improve its returns, whether it is real estate or any other asset.
High to Low: Evaluate How Your Money Will Grow With Every Investment Option
The top ten investment opportunities are listed in the article. Before investing in any of the investment options listed below, the investor’s risk profile must be matched with the risks associated with the investment product.
Hyderabad: The Emerging destination for commercial real estate investment in India
In terms of gross office space demand, Hyderabad surpassed Bengaluru as India’s top CRE destination during the July-September quarter. According to real estate experts, Hyderabad emerged as one of the most resilient cities following an average performance in the second quarter of 2021.
How Much Is The Average Rental Income in Top Indian Metropolitan Cities
There are numerous opportunities for real estate investment in 2021. Property prices in major cities that had remained unchanged have begun to show some positive shifts.
12 Proven Tips To Attract Tenants To Your Property
Everything a rental investor does is designed to attract more or better tenants. Here are some tips to help you discover tenants and enhance your rental yields.
Fractional Ownership: A Perfect Solution to All Your Real Estate Concerns
Fractional ownership in real estate is a new concept in which individuals can pay a median amount of money to become owners of high-end commercial properties. It is gradually gaining traction as a modern real estate investment paradigm.
Investment Trends: Top 11 Countries With The Most Developed Coliving Ventures
The world around us is rapidly changing, making it more developed and convenient. This change is resulting in a shift of housing patterns, making coliving the hottest option for investment and living.
9 Investment Habits to Develop for High Passive Income
The money you generate from passive income will surely put you well on your way to meeting your financial objectives and bringing you one step closer to ultimate financial freedom. Find out where you stand financially if you’re wondering how your finances currently stack up!
How To Fix A Bad Retirement Plan With Quality Investments
One can protect his retirement savings from a crash by having a diversified retirement portfolio. It involves investing in real estate, mutual funds of stocks, bonds, and even cash. Rebalancing a portfolio is also another way to protect retirement savings.
Smart Real Estate Investments: What Are Grade A, B, C In Commercial Properties
A very essential part of the investment is knowing what grade you are investing in and what do you expect to earn from it. In commercial real estate, investments are generally categorized on the basis of their key qualities, characteristics, and demand. These rankings are useful in gauging the property’s position in the marketplace.
What is House Flipping? How is it Profitable?
House flipping is a fruitful business for both part-time investors and full-time flippers. The idea, although new to India, is gaining wide popularity and might make one of the greatest investment ideas for the future.
The Aerotropolis Culture Is Ready To Take Off In India
Aerotropolis or the airport city is an urban development with an airport at the center and aviation-linked businesses growing and flourishing around it. The concept has attracted a lot of investors to work on its greenfield airports of Bangalore, Hyderabad, and Kochi. These are also emerging as great investment hubs and Assetmonk is bringing an investment opportunity within Hyderabad International Airport.
5 Reasons Why Entrepreneurs Should Consider Real Estate Investing
While some people believe that real estate investments are only for the rich as they require large sums of money, real estate can be a great option to keep your assets intact and growing. Here are the Top Reasons Why Entrepreneurs Should Consider Real Estate Investing
As India Recovers From COVID, Here’s How The Real Estate Sector Is Healing Itself
As the Indian real estate market shows signs of returning stability, Bangalore, Chennai, and Hyderabad have taken the lead in Commercial real estate. As Mumbai and Delhi NCR witnessed a rise in demand for residential properties.
Can You Become a Millionaire Through Real Estate Investments?
Every investor that approaches real estate has, at some point, asked whether the real estate was the ideal choice for them. Real estate investments do have enough strength to make you a millionaire but only when approached smartly.
Understanding GST Rules for Various Real Estate Asset Categories
Here’s everything you need to know about the Goods and Services Tax regime and how it will affect you financially.
The Ultimate Guide to Ace Investment Portfolio Diversification
Portfolio Diversification is the practice of spreading your investments over various investment classes that have different expected risks and returns to reduce exposure to extremely harsh risks. Diversification has many positive impacts on one’s investment ✓ Reduce the impact of market volatility ✓ Great long-term investment ✓ Ensures capital security
Still worried about real estate investment? Here is the complete guide to investment risk management
In the world of real estate, property investment has long been a hot topic. People have shown a desire to invest huge sums of money in residential and commercial properties. However, the fact that remains unspoken is that the investment will only be effective if the purchasing method is carried out appropriately. There are various concerns that you should be aware of, even if they are not immediately apparent to you.
Real Estate 101: Don’t Confuse IRR and ROI To Become An Expert
Internal rate of return (IRR) and return on investment (ROI) are two typical metrics for determining how well an investment has fared over time.
