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Introduction
Retirement is the point where a person is not in any kind of employment /business/occupation. This usually happens upon reaching a determined age, when physical conditions do not allow the person to work any more. Retirement could also be due to personal choice-either due to adequate pension or personal savings or due to a regular unearned income like interest, rents etc.
The retirement age varies from country to country but it is generally between 55 and 70. Certain jobs, which are of dangerous nature or of fatiguing nature, may have an earlier retirement age.
Retirement Planning
Retirement financial planning refers to a collection of systems, methods and processes which support a family units (clients) desire to achieve a state of financial independence. It is a process of determining the financial goals at the point of retirement. It requires constant monitoring of the progress of the plan and then taking adequate remedial measures
LIFE EXPECTANCY
Life expectancy is the major ruler of retirement planning. As per the Indian context, still the importance of retirement planning is not clearly identified. With the increasing life expectancy, high standards of living and high expectations for the upcoming future, pressure is building up for fund allocation, to meet up the needs of retirement. Longevity of life expectancy has to be kept in mind while making out a retirement plan.
Key factors to be evaluated while making out a retirement plan are present life style, income and capacity to save, family circumstances, level of inflation prevailing in the economy & the standard one would like to maintain at the time of post retirement
To maintain up current life style one has to plan to save almost 65 to 85% of current income.
Life Cycle
Every phase of life cycle has a different level of income, expenditure and saving. The first phase of life cycle is the childhood where an individual has no earnings but certain amount of money is spent on him/her (school fees, clothing, food etc). Second stage comes where the individual may or may not start his real earnings or a stable career.
In the third stage an individual enters a stable career and has good amount of earnings to save and start planning for his/her retirement Fourth & fifth stage is time period to save maximum and allocate maximum funds for the retirement planning. In the sixth stage comes the old age. At this stage the savings tend to reduce because of medical expenses, new expenses related to old age etc. The last two stages of the life cycle is the retirement period where the saving are utilized to cover the real retirement years or retirement costs.
Career Stability
Career stability is one of the most important factor which clearly needs to be evaluated to develop a retirement plan. Fund allocation for retirement is done with the help of surplus earnings of an individual during his/her pre-retirement period. Stable career and in return stable earnings provides a scope for having well planned and organized retirement plan
Employers also have a important role in retirement planning as they contribute in pension plans other contribution plans etc. Career stability helps to draw clear anticipation of future earnings can be which helps in retirement planning
Employer-Employee Relationship: This issue covers the factors like loyalty of an individual towards the employer, future protection provided by the employer, motivation, leadership, timely appraisals. Changing economic conditions: The economic conditions of a country like recession cycles, developing sectors, problems related to any particular sector private and public ownership etc also affects the career stability. There are also various policies and economic strategies of government related to employment & foreign investments etc which have a direct affect on employment scenario.
PRE-RETIREMENT COUNSELLING
Introduction
It is an planning. interactive part of retirement
In pre-retirement counseling all the basics of the retirement plan are drafted as per the needs and expectations of the client and as per the clients present and anticipated financial conditions. Financial planner has to clearly evaluate the needs, attitude & lifestyle of the client to have a strong and trustworthy relationship with the client.
Retirement Expenses & Sources Of Income: Clear identification of all the costs & incomes has to be made. Provisions for allocating 65 to 70% of current income for the retirement period should be drawn.
With increasing life expectancy, and other challenges a life insurance can provide a life-long, worry-free retirement and insurance protection. Major expenses of the retirement years are the health care costs, health insurance can act as a helping hand in that case to meet up these costs.
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Estate planning should maintain out the costs of the property and should develop an estate plan to give proper and safe income generation. Estate plan will cover all the legal formalities and all the documentation regarding future transactions.
Proper tax planning can itself prove out to be a saving tool because with effective tax planning is basic foundation for effective retirement planning.