Mr. Alok Shukla and Mr. Amit Mehta felt the need for setting aside a nest egg, which will serve them well after they decided to hang up their boots. The issue they faced is that despite saving, there was not enough to go around for a good retired life. Hence the need for “Smart Saving and a New Way of Thinking” on Retirement Investments.
The Right Way to go about Investing for Retirement
When you are young and able, you can laugh off setbacks and tough times and work your way through them. The older one gets, the tolerance for volatility reduces and you desire stability of lifestyle and income.
So again no one will disagree with the premise of planning your retirement well. It’s just not given the priority, urgency and thought it deserves. It’s a goal that is pushed aside for too long. Very often saving begins too close to the actual retirement age. So there isn’t enough time for it to grow and work for you as well as give it a new age thought.
When should one begin to save for retirement?
The answer is as soon as you start working and generate an income. Most young people will balk at the idea as it seems so premature. Financial education at the right time is really the moot point. The earlier you start the better. However while in theory it’s good to start saving early, practically it’s not possible as early stages of career have many other financial outflows. But this not should stop you from acquiring financial wisdom.
Unfortunately most acquire financial wisdom and understanding of the power of compounding after they are already middle aged. By then the saving ship has sailed, you will probably need a ride in a supersonic jet to arrive at your destination. Do not lose heart here, as you will find that those who started saving early but not smart have not gained much. You can start saving smart and that will easily take you through your retired life.
What should be done first?
The top most priority is to have an adequate medical cover. The need cannot be overemphasized. It’s just a no brainer. Take the maximum possible cover as healthcare costs have become prohibitive.
Life Insurance. If you are the principal bread winner of your family adequately cover your life preferably with low cost term insurance. Term insurance is cheaper when you are young . Keep increasing your cover till you have reached a reasonably high sum. Howe much cover is enough? The thumbrule is that the life insurance money should ensure a standard of living for your family if you die prematurely.
This ensures that in case of an unfortunate eventuality your dependents are taken care of and your spouse has a comfortable retirement.
How much should one set aside for retirement?
There is no formula but if you begin very young and set aside at least 10% of your income every year as your retirement kitty , it will serve you well. These funds should be sacrosanct and should not be touched under any circumstance. Even if you do not begin saving young, which practically is not possible many times, you should start setting aside funds for retirement as soon as you have any excess funds after all your needs are met. Again do not look at quantity, look at quality of savings.
What Assets to buy in?
Ahh..that is a question which begs an answer. No matter how distasteful it is involvement in your investments and how they work for you is absolutely imperative. The world of investments is interesting and everchanging. It is challenging and good fun to understand it. One philosophy you must follow is, invest in whatever is productive and growing and that will take you through your retired life.
Choose a good Advisor, which could be you
A good trustworthy financial advisor is as necessary as a good spouse. Long term happiness hinges on the right advise. How you choose your asset allocation and what products you buy in and how well you track and churn your portfolio depends on the advise.
The sad part of our lives is that there is less effort put in choosing our advisors than in choosing gadgets. The shiny objects which rip our pockets get a lot of our interest and attention.
Before we buy our new smartphone or a tab we ask friends ,go online, read reviews, compare brands before we decide to write a check. After we have acquired our new gadget we constantly compare its performance and upgrade to a new technology as soon as ours get obsolete.
Our search of a good investment advisor who will give us the right asset allocation and specific actionable tax efficient recommendations deserves at the very least a similar effort.
A good advisor will counsel you regularly and look at your changing needs and rebalance your portfolio.
So look around compare performance and get comfortable with your advisor. Make sure his or her advise is not outdated. Times have changed and the formulas which worked before just does not cut any ice anymore.
The best Advisor is always “Yourself”. It’s your money and life and the more you learn about investing the better advise you will given yourself. Fortunately for you in this information age, you can get the tools to invest from online platforms that aim to educate and guide you on Retirement Investments.
In conclusion don’t forget to enjoy your life. Too much anxiety about the future just robs you of the present.