Last Updated on February 12, 2022 at 6:16 pm
Retirement planning is the hardest exercise in financial planning or in other words making sure we are heading towards an adequate retirement corpus that will outlive us. There are many unknowns and uncertainties while planning for retirement. A good plan is essential to counter these. Also essential is a yearly review and recalculation of the retirement plan. This is a list of factors that need to be considered while planning for retirement.
While planning for retirement, all we can do is to find out the corpus required to maintain current lifestyle after discounting school fees and EMIs which would not persist in retirement (hopefully!). And lifestyle changes every year.
This seems to only have a positive connotation, where imagine a better car, a better phone, a better TV and the like. While this is true, it also refers to changes in health and physical ability. Additional tests and medical expenses. Just this since fact alone is enough to recalculate the retirement plan every year and account for changes.
🔥Secure your future with our Robo-advisory tool trusted by over 3,500 investors and advisors. From effortless retirement planning to funding your children’s biggest dreams, turn your financial goals into reality. 🔥
Subscribe for money management solutions via email! (Link takes you to our email sign-up form) Join 32,000+ readers in our community.
👉 New Tool Alert! NaviPlan: A Privacy-Focused Multi-asset Tracker and Goal Planner 👈
First, we need to ensure we are planning for retirement the right way. That is we need to account for as many possibilities and uncertainties that the margin of error in the corpus estimate is reduced as much as possible.
Most retirement calculators use a single return entry to account for pre-retirement planning and a single return entry for post-retirement. As long as it accounts for inflation and the input is a reasonable, realistic one – min 6%, preferably 8% – this is good enough for a first-time ballpark estimate.
Soon we realise that we have different kinds of asset classes – tax-free debt like EPF, PPF, taxable-debt like debt funds and FDs, debt with an income component like NPS, stocks, equity MFs and so. So they would need to accounted for individually with separate growth rate assumptions. The pension from these products should be accounted for. Rental-income and other sources should also be included. This can significantly reduce the total amount to be invested today.
Then, the retirement corpus would need to be divided into several buckets – an income bucket with cash, pension and safe, liquid debt; a medium risk bucket and a high-risk bucket.
The asset allocation before retirement has to be varied to lower risk. That is, the equity allocation should be reduced well before retirement. This must be included in the plan from day one, else we might end up with a lower corpus. Why? If we assume a return of 12% from the entire portfolio (many assume more) and start lowering equity, there could be a return mismatch resulting in a lower corpus.
Those who are close to retirement should evaluate if they have a large enough corpus. That is, large to divide it into buckets and drawn an income from it or buy a pension plan, invest the rest and hope for the best. It must also factor in a robust strategy to handle the sequence of returns risk.
The search for answers to the above questions led to the Freefincal Robo Advisory Software Template. It accounts for pension income, retirement buckets, a gradual decrease in equity before retirement and tells you if your corpus is large enough to adopt a bucket strategy The bucket strategy conservatively assumes risk-free return for the first 15 years in retirement mitigating poor returns risk after retirement.
Once we have done our best to account for known risks, then and only then should we evaluate our retirement once a year. Redo this calculation and find out where we stand.
We are on Google News
Use this button to add freefincal.com as a preferred personal finance source on Google News. 
Add freefincal as a preferred news source
You can also follow freefincal on Google News. 
Explore 1,000+ videos on YouTube!
Subscribe to get posts via email!
Join 32,000+ readers and get free money management solutions delivered to your inbox! (Link takes you to our email sign-up form)Join our WhatsApp Channel
Explore our products
🔥Join our community of 9000+ users! 🔥 Use our Robo-advisory Tool to create a complete financial plan! More than 3,500 investors and advisors use this! Use the discount code robo25 for 20% off. Plan your retirement (early, normal, before, and after), plus non-recurring financial goals (such as child education) and recurring financial goals (such as holidays and appliance purchases). The tool helps anyone aged 18 to 80 plan for retirement, plus six non-recurring and four recurring financial goals, with a detailed cash flow summary. Our Flagship Course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,500 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market conditions! Watch the first lecture for free! One-time payment! No recurring fees! Lifelong access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence. Join the freefincal investor circle! An exclusive space for investors, advisors, fintech employees and students to access financial planning and insurance tools, mutual fund and stock analysis tools, coding strategies and Excel macros for data extraction. 750+ members are now part of our investor circle. Increase your income by getting people to pay for your skills! More than 900 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner seeking more clients through online visibility, or a salaried individual looking for side or passive income, we will show you how to do it by showcasing your skills and building a community that trusts and pays you. (Watch the 1st lecture for free). One-time payment! No recurring fees! Lifelong access to videos! Track your mutual funds and stock investments with our Google Sheet! We also publish monthly screeners for- Equity mutual funds
- Debt and hybrid mutual funds
- Index funds
- ETFs
- Momentum and low-volatility stock screeners
Our Podcast: Let's Get Rich With Pattu
On Spotify: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth!
Audible Link: Listen to the Let's Get Rich with Pattu Podcast
You can also watch podcast episodes on the OfSpin Media Friends YouTube Channel
Listen to the Let's Get Rich With Pattu podcast on YouTube.
Now watch Let's Get Rich With Pattu தமிழில் (in Tamil)!About The Author
Dr M Pattabiraman giving a lecture
Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over 14 years of experience publishing news analysis, research and financial product development. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice. Connect with him via Twitter(X) LinkedIn YouTube Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (Published by CNBC TV18) for DIY investors. 
This book helps you ask the right questions and find the right answers. It also includes nine online calculators to create custom solutions.
(2) Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want. 
Both the boy and girl versions of "Chinchu Gets a Superpower".
Most investor problems stem from a lack of poor decision-making. We made bad decisions and money mistakes when we started earning, and we spent years undoing them. Why should our children go through the same pain? What is this book about? As parents, what if we had to groom one ability in our children that matters not only for money management and investing but for every aspect of life? My answer: Sound decision-making. So, in this book, we meet Chinchu, who is about to turn 10. The story follows what he wants for his birthday and how his parents plan it, while also teaching him key ideas about decision-making and money management. What readers say! 
Feedback from a young reader after reading Chinchu Gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from a young age. The importance of money management and decision-making based on their wants and needs. Very nicely written in simple terms. - Arun.
About freefincal & its content policy
Freefincal is a News Media organisation dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact Information: To get in touch, please use our contact form. (Sponsored posts or paid collaborations will not be entertained.)Our publications
Your Ultimate Guide to Travel
