Maximising retirement benefits: Ways to plan your income

When we think about retirement, we usually focus on leaving our jobs or businesses. However, true retirement is about gaining freedom from financial worries. Unfortunately, many of us procrastinate when it comes to planning.  To have a secure financial future, it’s best to immediately start investing as soon as you start earning. Even if you’re further along in your career or starting late, you can still plan effectively. Starting earlier allows for smaller, regular investments, while starting late may require larger contributions. But no matter when you start, taking action gets you closer to your financial goals.

Stage 1: Imagination

When we start thinking about retirement, we usually pick an age we’d like to retire. But many people struggle to make this happen because they haven’t figured out how much money they’ll need for a sound retirement. When there’s no clear goal, saving feels like it doesn’t have a purpose, leaving people feeling unsure and unready.

Stage 2: Hesitation

As retirement approaches and individuals realise they haven’t saved enough, financial stress increases. During this stage, people begin to more clearly envision their retirement and question their preparedness. This financial anxiety often heightens their feelings of uncertainty. Despite this, most people in this stage acknowledge that retirement is on the horizon.

Stage 3: Expectancy

As retirement gets closer, it’s a good time to think about what you really want for this next part of your life. Imagine where you want to live and think about trips you want to take. It’s also important to get a good idea of your money needs and learn how to invest wisely so you can live the way you want.

Stage 4: Moment of truth

Now that you’ve reached retirement, it’s time to relax and savour the freedom you’ve worked hard for. This is when you can finally start making your retirement dreams a reality. As you settle into this new phase, the reality of your finances will become clearer. If you’ve saved well, you’ll feel confident and at ease. If your savings are tighter than expected, you might start to worry about whether you have enough to truly enjoy this exciting new chapter.

To avoid falling in the second category, where you’re concerned about not having enough money for retirement, here are few things to be wary of:

Starting too late: Many people regret not beginning to invest sooner. The key is to start now rather than waiting for the perfect moment.

Not saving enough: Even if you start early, without clear goals, you might end up withdrawing funds for other needs or remain uncertain about how much you’ll need for retirement.

Improper asset allocation: Some investors are too conservative, placing most of their money in debt investments that barely keep up with inflation, which can limit your retirement savings.

Overspending in youth: Many people spend excessively on non-essential items during their earning years, neglecting retirement planning. They don’t realise their income will eventually stop, leaving them unprepared when they can no longer work.

Rash investment decisions: Impulsive investment decisions during peak earning years can negatively impact future savings. Speculating or investing without proper research can be risky.

The ideal strategy

Start with security: Begin by securing yourself with comprehensive health insurance and a term life insurance policy.

Plan for retirement: Next, focus on retirement planning. Assess your future needs and create an investment plan aligned with your long-term goals.

Fund key financial goals: Allocate investments toward important life milestones, such as your children’s education or their weddings.

Pursue additional aspirations: Lastly, invest in personal goals, like taking an exotic vacation or buying a luxury car.

Achieving a fulfilling retirement and pursuing the dreams you may have postponed during your working years requires thoughtful investment planning. Start by defining specific goals for each investment, manage your spending to maximise savings, and allocate your assets strategically — favouring equities when you’re younger and shifting towards debt instruments as retirement approaches. Making well-informed decisions will provide financial security, enabling you to enjoy your retirement independently and confidently.

(The writer is Head- Online Business, Axis Securities)