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A Detailed Guide to Setting Up a Retirement Plan

A pension plan sometimes referred to as a retirement plan, is essentially an investment option that enables you to save your hard-earned money over a predetermined number of years to create a stable post-retirement life for yourself.

A Detailed Guide to Setting Up a Retirement Plan-snt
Bengaluru, First Published Aug 5, 2022, 4:03 PM IST

A few years into your professional life, once it settles into a nice trajectory of growth, you may start to think about retirement, and rightly so. Professionals tend to ignore this crucial part of financial planning, leaving it to be handled at some later date. As we will see in this article, deferring your retirement planning to the future can be unwise, leading to financial strain when you actually start planning, or worse, an insufficient corpus at the time of your retirement.

You do not need to worry, though. We have compiled the necessary information and a list of strategies you can implement to create a good retirement plan optimized for your needs. Let’s begin!

What Is A Retirement Plan?

A pension plan sometimes referred to as a retirement plan, is essentially an investment option that enables you to save your hard-earned money over a predetermined number of years to create a stable post-retirement life for yourself.

Pension plans come with a guarantee of providing you with a consistent source of income once you retire, allowing you to live without having to make lifestyle compromises.

You must make consistent monthly contributions to a pension plan for the chosen duration. Additionally, after the selected tenure has ended, you will start receiving an annuity, which is a fixed payment made each month for the remainder of your life. This may virtually replace your current income stream with the monthly annuity payment, helping you cover your expenses.

What Are The Advantages Of Retirement Planning?

  • It helps you accumulate a retirement fund that will enable you to cover any post-retirement emergencies, such as medical costs.
  • It develops the practice of saving during your formative professional years.
  • It enables you to live independently after retiring without relying on your kids.
  • You can take advantage of tax savings on the insurance premiums you pay for your retirement plans.
  • Above all, retirement planning makes it possible for you to spend your golden years doing the things you love, including taking up new hobbies or travelling the world.

How Can You Make Sure That You Have A Solid Retirement Plan?

  • List Up Your Retirement Goals: You need to begin by figuring out what you want your retirement to look like. It can be anything from you investing your time in your hobbies or just taking off to see the world. It can be a challenging task, especially if you are a young professional, but even having a rough idea will go a long way in helping you plan for your retirement. This way, you can get a rough budget idea to fulfil your goals and make you choose the right plan accordingly. 
  • Analyze your Current Expenses: Once you have a rough idea of how much you will need to save by the time you retire, you can start      looking at your current spending habits to see if there are any unnecessary expenses that you can cut from your monthly spending and put them in your savings instead. Small expenses can add up in the long run and make a big difference to your final savings. You can take a look at your expenses in the last 3 or 6 months to see if a habitual change is required. 
  • Minimize Liabilities: This one might not apply to you now, but as you grow and achieve certain milestones in life, like getting married or having kids, you will be required to rise up to the responsibilities, which will mean accumulating certain liabilities. These may include personal loans, house loans, and car loans. Making sure you are prudent about how you choose to repay the loans and have them all closed by the time you retire are essential in ensuring that your life post-retirement is stress-free.
  • Go For A Retirement Investment Plan: Retirement Plans, or Pension Plans, can be hugely beneficial as they can be used as forced savings in the long run. You can get in early, enjoy the benefits of compounding over the years, and watch your money grow into a large enough corpus to provide a comfortable life post-retirement. 
  • Keep A Keen Eye On Your Taxes: As you grow older and level up professionally, your income will rise, and so will your taxes. Here, you might need to make investments that make a certain portion of your income tax-free and lower your overall taxes. A pension plan can provide exemptions on contributions of up to ₹1.5 lacs under section 80CCC of the Income Tax Act of 1961. 


Hopefully, this article has explained the basics of retirement planning and equipped you with some essential strategies that you can utilize to make a great retirement plan for yourself, or at least sow its seeds!

A great tool that you can utilize to get help in this is an online retirement planning calculator, which gives you an estimate of the amount you need to have saved by the time you retire, based on your current income, expenses, and the expected returns on your investments. So do not wait. Just begin your retirement planning today!

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