Tips for Better Retirement Planning

 As per a recent survey, retirement life goals have taken precedence among Indians with 71% nurturing retirement-related goals in 2023 against 35% in 2019.

Retirement planning can be easily undertaken while adhering to a few of the following points.

Keep aside 10% of pay as a reserve for retirement years: Current rules mandate that any organisation with 20 or more employees will have to compulsorily register with the Employees’ Provident Fund Organisation (EPFO) and extend workers with Employee Provident Fund (EPF) benefits. This also proves beneficial in saving taxes under Section 80C of the Income-tax Act (ITA), 1961. 

Apart from this, an individual can look forward to opening a National Pension System (NPS), which is a voluntary retirement savings scheme having the lowest management cost. An individual can also look forward to gaining from the additional tax benefit of up to Rs 50,000 under Section 80CCD (1B) of the ITA. Considering the lock-in period involved in this scheme, it remains an ideal tool to build a suitable retirement corpus. 

Rise in investment should be in proportion to rise in income: This attitude toward finances will not only help an individual to beat inflation but also address the lifestyle issue in the long run. For example, a raise of 10-15% annually, calls for an appropriate increase in investment to accumulate a decent retirement fund. 

Save for retirement and opt for an education loan (if needed): Instead of digging into the retirement corpus to fund the higher studies of a child, it is a prudent move to opt for an education loan. Ideally, retirement funds should be left untouched until the need arises. 

Start 5% withdrawal on an annual basis and increase after retirement: When it comes to spending after retirement, it would help to draw a plan. A rule of thumb is to not withdraw more than 5% in the initial five years of retirement. At the age of 70, this withdrawal range could be increased to 10%, followed by 20% at age 80 subsequently. The retirement corpus will undergo depletion to beat inflation in the long term.

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