Retirement planning refers to various financial strategies for saving, planning, and eventually allocation of funds intended to sustain one’s life through retirement. A holistic approach towards retirement planning considers all of these aspects simultaneously. It is important to set specific goals in retirement planning so as to live accordingly. The first step in retirement planning is to identify and determine the income level necessary for a comfortable retirement and calculate the cost of living during retirement, considering all factors like insurance, taxes, and living allowance.
There are various retirement planning tools available online that help people analyze their financial status and identify their future pension and retirement goals. Retirement planning goals can be of varied nature such as buying a car or going for a holiday abroad. After retirement planning is done based on the identified future goals, monthly expenses and total assets are calculated. Then a final retirement plan is proposed, depending on the amount of savings made for retirement planning and provided as per the financial institution. The purpose of a retirement plan is to provide adequate funds for maintaining the standard of living in retirement. In some cases, a pension plan may also be suggested by an employer where the employee’s contribution towards a pension is tax-deductible and thus a large part of the employee’s pay is deducted as retirement income.
For retirement planning purposes, the key concept is asset allocation. The most important assets are those with high compound interest values such as stocks, bonds, real estate, and bank accounts. One must also have some savings in term funds so as to cater for unexpected expenses. During retirement planning, it is important to make contributions in the form of buying pensions or using one’s money for charity. At the time of retirement, one should have sufficient savings to fund the payment of taxes and insurance on income received, if any, so as to avoid any kind of backbreaking tax. If one has any costly medical condition, then proper health care expenses should be taken care of in order to keep the individual out of the soup line.