Man by nature in general, if things go on well today never thinks about tomorrow or future. But in reality whether rich or poor needs a proper retirement plan so that one can lead a peaceful and comfortable life without becoming burden for any body or for themselves after their retirement. To full fill their ambitions and to spend their dream life after retirement one has to stick on strictly to their retirement plan and also in their investments to build their retirement fund.
Why one needs a proper retirement plan in his life?
The following are the important reasons why one needs a proper retirement plan. One may realize the necessity of building of a retirement fund very late but one can say it is never too late to start or it is sooner the better one starts. Definitely we can say that is the importance of retirement plan.
1. Life expectancy of present day man is high
The present day average life expectancy of man has dramatically increased to above 70. Because of this a person has to built a retirement fund which financially assist to cover all the years according to the new life expectancy for himself as well as to his better half.
2. Unexpected medical emergencies
When a man is in his active life one may not think about any eventualities that they may face in their life. Medical emergencies are one of the situations which really shatter the dreams of their after retirement life. Retirement plan is one which allows a person to build a life which can help them to face any uneventful situations with great confidence.
3.Trend of nuclear families
In the past joint families are so common among the people. The earnings of the working members was used to pooled up to run the needs of the joint family. The members who became old were looked after and treated well by the earning members of the joint family. But at present such families were completely disappearing and in their place nuclear families started growing due to economical constraints . In such nuclear families, if earning members retire from their job or active life no one can look after them like in a joint family. In such situations, definitely there needs a proper retirement plan far well a head before they retire so that they can spend their after retirement life happily.
4. Present pension plans are not well equipped
In the past those who work in Government Offices or Institutions used to get definite amount of pension monthly which used to serve the entire needs of the person as well as his better half. But because of economical constraints of many countries of the World both Government or non Governmental organizations encouraging the job holders to build their after retirement fund.
5. Alarming inflation rate
At present the inflation rate has reached its peak causing the life of common man worse. Due to this inflation, the cost of living of a common man became alarmingly high. It is not easy for any body to estimate how the cost of living will be in the future after ones retirement. To reach such unseen needs in future after retirement, every one needs a a well planned retirement plan.
What are the things one has to take into account before planning for a future retirement fund?
What are the ways by which one can build an after retirement fund?
Following are some of the positive ways by which an employee can build an after retirement funds to see off his needs through out his after retirement life.
1. Traditional pension plan
Most of the Governmental and Non-Governmental organizations provide traditional pension plan for their employees. Usually the pension they get monthly after their retirement will serve the basic common needs of the retiree and his better half. But if if one wish to lead his after retirement life according to their wish definitely they have to build their own after retirement fund. The employer's retirement pension scheme is the major source of financial assistance for the retiree. To build ones own after retirement fund one has to know how the pension scheme it works, what benefits one get after retirement from the services etc.
The employee must keep track with the following points so that he can have a clear idea about how his financial position will be after the retirement. This also will help him to build his own after retirement fund.
1. To know about various types retirement plans available.
2. When and in which way one can receive retirement benefits.
3. If there is a doubt regarding the pension plan how to approach them.
4. If you leave the job in the middle or after some years of service what happens to your pension scheme.
5. In special situations like divorce or change in the management of an organization how it will affect your pension scheme.
2. Contributory employer's retirement scheme
Due to economical constraints even many of the Governmental organization have stopped giving pensions and hence they are encouraging the employees to build their own after retirement benefit fund with the help of their assistance. To gain maximum benefits out of the scheme one has to sign up for the scheme and has to contribute whatever they can. In this scheme whatever the employee contribute to a particular level, an equal amount will be deposited by the employer every month. The employee must contribute the maximum possible level for the scheme so that he can get an equal amount of share from the employer in to his retirement scheme account as well as he will get the benefit of tax exemption on his salary.
3. Make savings policy a priority for your retirement
Retirement life is always an expensive life. Unlike you get monthly salary on the first day of the month when you are in job you do not get now. In retirement life returns become less and expenditures become more. You start your savings as early as possible in your active life. If you start such savings from the early part of your life you can receive lump sum amount of money by the time you retire from your active life from these investments. At less age one may go for risk investments like company shares which may fortunately bring heavy profits. At a higher age one may go for safe return investments like Postal or Bank fixed savings. It is always better for a person to diversify his investments in various sources like Company shares, Bank mutual funds, Debentures or Bonds of firms, Gold certificates, ETF's, Post office saving schemes, Company fixed deposits, Life insurance policies, Real estate business etc. Through diversifying ones investments will protect a person from the losses he may get in one type of investment be covered by the other type of investments.
4. Give more importance for building assets rather than accumulating money
It is always good to build assets like buildings, Apartments, Flats in Apartments, Agricultural lands, Jewelery, Gardens with fruit trees, Factories, Hotels, Restaurants etc. rather than accumulating money. Money in course of time get devalued but these assets values will always multiply as the time progresses. These assets not only hold a lot of value but also provide regular income like a golden hen.
5. Take life insurance and health insurance coverages
Of all the investments, life insurance and health insurance investments are very important in ones life. Life insurance policies not only cover the risk of the life of a person but also provide lump sum amount after the policy is over. Many Nationalized Banks and reputed Companies providing health insurance policies also. Many of these policies help in economical assistance of the charges a policy holder has to bear for surgery or in hospitalization situations. Now a days, health insurance policies are available for a small family group like four members, medicine charges for out patients and inpatients, hospitalization, surgery charges for the health policy holders and even with a more premium the insurance may be covered even up to 80 years also. A person must take these policies to eliminate if any heavy deficit may likely to be caused to the retirement fund due to health problems.
6. Always try to build your retirement fund but never withdraw any money from your savings
It is always good to invest more and more money to grow your retirement fund but never try to remove from it and once you start this it may become a habit for you. Because of withdrawal of premature savings you will loose your principal, interests, tax benefits and also you have to bear withdrawal penalties.
Retirement planning is nothing but a financial planning of your future needs after retirement. But many people may be highly educated in various subjects but in financial dealings they are very poor. The Government authorities or employers who provide the job must make aware their employees to build a strong after retirement fund from the early stages of their life. Proper training must be given for the employees in the aspects of, Why they need a proper retirement plan?, What are the basic things they have to keep in mind before make a plan for retirement, What are the different ways one can build his retirement fund through diversified investments which make ones after retirement life a heavenly place on earth.