How to plan your retirement?

“Old age is like everything else. To make a success of it, you’ve got to start young.”

-Theodore Roosevelt

In India, the most common beverage consumed is a cup of hot tea. It is served in the house, every morning, evening and sometimes even at night. A cup of hot tea is comforting and each person has their own way of making tea depending on their tastes. Such is the case of saving money. Many people do it in a different way. Now one of the most mundane of all saving is that of retirement. When approached with the subject people wave it off saying they’ll probably never retire or they will be well taken care of by their dependents. But like they say, your parents are not your emergency fund and your children are not your retirement fund. That’s why planning for your savings is crucial for maintaining your lifestyle even after you retire at that time.

So how does a person begin to plan for retirement? Well, there are two important points to keep in mind:

• Your Spending

Every person’s individual spending habits vary. Some spend on food while others spend on clothes, some spend on their trips to exotic places while others spend on furnishing their dream home. One of the most important things to remember is that what you spend now will only increase in the years to come thanks to the constant inflation. So, in order to plan for what you spend after you retire to take a hard look at how much you spend these days. Try and anticipate how it will grow over the years while taking into consideration the inflation in the market. An easy way to do this is using the Rule of 72 which states that if you want to know how long it will take to double your money at 6% interest(inflation), divide 72 by 6 and get 8 years. Knowing this will instantly give a clear picture on what you need to do rather than leaving it up to chance to figure it out.

• Your Saving

Now it comes down to how much a person must save. Many already have savings like FDs and Provident Funds so it can vary in terms of that. But when it comes to stocking up for your retirement there is a formula that will work wonders for you. Based on the age you are you save up that percentage of your income (after taxes). If you are 25 you should put away 25% of your income, if you are 30 you must put away 30% of your earnings. This should begin as early as you start to earn right until you are 55 or 60 years old.

Say you are 65 when you finally give yourself a break and want to sit back and take the load off. You will have children who take care of you and dependants that are always with you. Would it be better to still be standing on your own and do whatever you want rather than be totally dependant on others? You can use the money to pay your bills, go on that trip you planned for, buy your dream house, even pay for your dependent’s emergency needs at times.

Retirement isn’t just another option, it’s a need. So don’t delay, choose a way to save up for your retirement. The money you save today is like a bag of tea that is stored up until the right time. When you finally retire you can have a hot cup of strong tea. However, if you don’t plan for it and save up, you will have only a weak tea that gives no energy or comfort whatsoever.