July 23, 2024



Which stage of retirement planning are you in?

8 min read
Which stage of retirement planning are you in?

Retirement planning is a life-long exercise. Ideally, it lasts from when we draw our first salary/income to when we (or the surviving spouse) draw our last breath. During this journey, there are several stages. Each stage teaches us something new. Here are some of these stages. This could vary from person to person. This listing is based on personal experience and interactions with readers.Note: Not all investors will go through these steps. Factors like time left for retirement, the amount invested, salary growth, assets invested, change in expenditure, health and much more affect our retirement planning.1. I have plenty of time to worry about retirement planning. Why worry now? This is when only mandatory or parent-influenced investments like EPF, PPF, and endowment policies are in place.2. OMG! Why is the amount I need to invest so much? Why is the corpus required so much? Am I already done for? This is when we use a retirement calculator for the first time.What we do after this will determine our financial security in retirement. Do we strive to invest what we can and see where it goes, or do we give up saying, if the glass is not full, I don’t want it? For inspiration, see: We lost sleep after using a retirement calculator! This is how we recovered.This is also when investors appreciate the need for equity in the portfolio — the sooner the realization, the better off the retirement. Those with an inadequate corpus and insufficient time to increase equity must be ready to work longer.3. I am doing what I can, and now I hope for the best. A sense of calm starts to build after a few years of systematic investing and increasing investment as much as possible each year. We are doing everything we can.4. Retirement corpus = 3 times annual expenses (aka  = 3X). That is the glimmer of hope we have been looking for. That gives us the faith. Maybe, just maybe, we can build a reasonable corpus (provided there is enough time to retire). More importantly, the motivation to invest systematically.5 Retirement corpus = 5X. What do we have here? Now, the dreams kick in. When would this be 10X, 25X?6 The confidence continues to build. We look at market risk differently. What seemed risky, like gambling, now seems like second nature.7 Additional sources of income. With the basic arrangement to build the corpus in place and ticking along nicely, we start thinking about a retirement portfolio. Initial retirement calculations assume withdrawal from a single pot.Passive, rental, and dividend income are all part of the mix. These are some related resources.8 Risk-reduction: How long should I hold 50-60% equity? When should I start reducing it? How much equity should I hold after retirement? These are some of the questions that spring to mind at this stage.  Creating a Retirement Portfolio: How to Determine the Right Equity Allocation.9 Post-retirement strategies: Now, we pay attention to a retirement bucket strategy, the importance of a pension or income flooring and annuity laddering and how to combine them: Is it possible to combine a bucket strategy with income laddering after retirement?Ideally, both 8 and 9 should be incorporated from day one of retirement planning to ensure we do not underestimate the amount required. This is implemented in the freefincal robo advisor tool.10 Retirement corpus  = 30X the threshold of financial independence, but it’s not quite there.  The vicissitudes of the market and life teach us that simplistic notions of financial independence, like a 30X corpus, are far from enough.We must tighten our retirement planning with zero or negative real returns (post-tax) after retirement. We must aim for a withdrawal rate less than 4%, preferably less than 3%. See: What should be my safe withdrawal rate for retirement?11. Dreaming big: This is the time to aim higher. Can I hit a 100X corpus before retirement? Can I hold onto 60% equity all my life? Can I leave a legacy for my children? Can I build a platform with which my children can follow their passion?12. Focus on how to spend time after retirement. Even if we do not need the money, gainful employment after retirement is essential for our health. So we must think about it and plan for it well. If we have a robust secondary income source, we may not have to dip into the corpus unless necessary! See, for example, How to build a second income source that will last a lifetime.Do share this article with your friends using the buttons below. 🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users! 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We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question. Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!About The Author Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice. Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence. Our new course!  Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!    Our new book for kids: “Chinchu Gets a Superpower!” is now available!Both the boy and girl-version covers of “Chinchu Gets a superpower”. Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!Feedback from a young reader after reading Chinchu gets a Superpower!Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. – Arun. Buy the book: Chinchu gets a superpower for your child! How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only! Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool! We publish monthly mutual fund screeners and momentum, low-volatility stock screeners. About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters at freefincal dot com (sponsored posts or paid collaborations will not be entertained) Connect with us on social media Our publicationsYou Can Be Rich Too with Goal-Based Investing Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. 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