Retirement planning is an important aspect of long-term financial planning. When you retire, you may not have a regular income source like you have while you are employed. Thus, how do you take care of your expenses during old age? A simple answer is – retirement planning.
Retirement planning essentially means making necessary financial arrangements for your future. Many people get overwhelmed by it. However, retirement planning is not as difficult as it may seem. The key to efficient retirement planning is starting early and saving or investing a small amount in different schemes throughout the working years so that you can build a large corpus.
Let us look at the benefits of retirement planning
Protection during emergencies
After you retire, you may not have a fixed income, and the unpredictability of not having sufficient finances to take care of your regular and urgent needs may cause financial strain. Hence, it is vital that you prepare yourself for such situations. This is where retirement planning plays a critical role.
Retirement planning allows you to build a sizeable corpus for the future that you can use after you hang your boots and ensure that you and your beloved family members remain protected through all situations, even during a crisis.
Valuable returns on investments
Another significant feature of retirement planning is that it allows you to grow your savings over time. Depending on the investment portfolio you have, and the schemes that you have invested in, you can earn valuable returns. The capital growth will hold you in good stead in your post-retirement life when you may need access to a large sum for emergencies or to meet big expenses like child education and marriage.
Get tax benefits
Today, there are many retirement savings plans that you can invest in and create a sound retirement for you and your family members. When you compare and choose to invest in a specific plan, you must know if it is tax efficient.
For example, if you invest in a bank fixed deposit, then you may not get any tax advantage unless you invest in a 5-year tax-saving FD. On the other hand, if you invest your money in schemes like NPS, PPF or mutual funds, then you can enjoy several tax benefits.
The amount you invest in these schemes is eligible for tax deduction under Section 80C of the Indian Income Tax Act. Also, the returns generated from these plans and the maturity proceeds you may receive are fully tax-exempt.
In India, over the years, the cost of living and prices of goods and services have increased manifold. The value of money decreases over time. This is called inflation. Without sufficient savings at your disposal, you may find it hard to survive and maintain your lifestyle, especially when you retire and have no regular income.
But with meticulous retirement planning, you can beat inflation. When you invest in different schemes, be wary of your choices and ensure that the plan you invest in provides inflation-adjusted returns.
Leave a legacy
With proper retirement planning, you can ensure that you have sufficient funds to take care of your need during the post-retirement life. Also, if you have built a sizeable corpus, then you can leave a legacy behind for your family and leave the money for your children or grandchild to inherit. You can even donate your savings to a charitable cause that is close to your heart.
In a nutshell, the benefits of retirement planning are many. It secures you and your loved one’s future. More importantly, retirement planning is not difficult either. It only requires you to be aware of your financial condition and goals and make the right investment choices.