Why Financial Planning is needed for Retirement?

Financial Planning is needed for Retirement

Meeting financial goals may prove to be a race against time. If you fail to accomplish this aim, it is evident that you may run into obstacles. Hence, it is important to learn about smart investing and how to build wealth till you retire. In this blog post, we will tell you about why you need financial planning before retirement.

  1. It helps you to pay off your liabilities – Financial planning is all about knowing different avenues of investment for different stages of life. For example, your short term goal (less than 3 years) may include lowering down your tax liabilities or paying off some debt. A medium term goal (4-7 years) may entail buying a property and a long term goal (8-12 years) may be to save for your child’s education and marriage. So, it is important to determine your financial goals beforehand. It will help you to pick up the right investment product.

Smart Tip- Ear- mark different investments for each goal.

  1. It helps you to combat against rising inflation– Twenty years ago from now, your annual spending was Rs 10,000, and now it has steeply increased to Rs 30,000, thanks to the nail-biting inflation. Though you won’t feel the pinch of it, still you are working, but you would feel the sting when you retire. Hence to combat the inflation, we advise you to invest in the below-mentioned products:
  • Equity – Equity is the best way to combat after-effects of inflation. Sample this, Sensex was at 3000 level in 2001, and now it is 31,797 in 2017, a compounded annual growth of 15% on average. With this statistics in mind, we advise you to invest in the equity share market or SIP or mutual funds depending on your risk appetite.
  • Gold- it is believed the value of Gold will never go down. It acts as a hedge against inflation.
  • Real Estate- Another warrior that will help you to spiral down the aftermath of inflation is the real estate sector. However, there are certain factors that you need to take into account before investing in real estate like maintenance charges, property tax, documentation proceedings, etc.

Smart Tip– Life may throw a curveball at you at any point of time. So, be prepared and invest in the products that fund you even after the retirement.

  1. It shields you from untoward expenses- It is said, “Unless you are immortal, you need life insurance.” Hospital expenses may ruin the life of your loved ones. Hence, it is important to buy an adequate life insurance and health insurance coverage. Insurance acts as a risk mitigation tool, and it protects the financial future of your family. The prudent way is to buy different kinds of life insurance policies. The life cover should be 10 times more than your annual income.

Smart Tip– “No matter what age you are in life, a life insurance policy is something to add to your overall portfolio.”

Retirement brings dependency; hence it is important to buy products that commensurate with your present life stage. The earlier you start, the better your wealth will accumulate.

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