Retirement planning is a life-long exercise. Ideally, it lasts from when we draw our first salary/income to when we (or the surviving spouse) draw our last breath. During this journey, there are several stages. Each stage teaches us something new. Here are some of these stages. This could vary from person to person. This listing is based on personal experience and interactions with readers.
Note: Not all investors will go through these steps. Factors like time left for retirement, the amount invested, salary growth, assets invested, change in expenditure, health and much more affect our retirement planning.
1. I have plenty of time to worry about retirement planning. Why worry now? This is when only mandatory or parent-influenced investments like EPF, PPF, and endowment policies are in place.
2. OMG! Why is the amount I need to invest so much? Why is the corpus required so much? Am I already done for? This is when we use a retirement calculator for the first time.
What we do after this will determine our financial security in retirement. Do we strive to invest what we can and see where it goes, or do we give up saying, if the glass is not full, I don’t want it? For inspiration, see: We lost sleep after using a retirement calculator! This is how we recovered.
🔥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 👈
This is also when investors appreciate the need for equity in the portfolio — the sooner the realization, the better off the retirement. Those with an inadequate corpus and insufficient time to increase equity must be ready to work longer.
3. I am doing what I can, and now I hope for the best. A sense of calm starts to build after a few years of systematic investing and increasing investment as much as possible each year. We are doing everything we can.
4. Retirement corpus = 3 times annual expenses (aka = 3X). That is the glimmer of hope we have been looking for. That gives us the faith. Maybe, just maybe, we can build a reasonable corpus (provided there is enough time to retire). More importantly, the motivation to invest systematically.
5 Retirement corpus = 5X. What do we have here? Now, the dreams kick in. When would this be 10X, 25X?
6 The confidence continues to build. We look at market risk differently. What seemed risky, like gambling, now seems like second nature.
7 Additional sources of income. With the basic arrangement to build the corpus in place and ticking along nicely, we start thinking about a retirement portfolio. Initial retirement calculations assume withdrawal from a single pot.
Passive, rental, and dividend income are all part of the mix. These are some related resources.
- How to earn one lakh a month in passive income?
- Passive Income Template: Steps to build a lifelong income
- Passive Income Automation: An Example
- What is the most profitable niche for a side hustle or passive income?
- Passive income is a crucial part of your retirement plan: How to get started
- Illustration: Passive Income Generation
8 Risk-reduction: How long should I hold 50-60% equity? When should I start reducing it? How much equity should I hold after retirement? These are some of the questions that spring to mind at this stage. Creating a Retirement Portfolio: How to Determine the Right Equity Allocation.
9 Post-retirement strategies: Now, we pay attention to a retirement bucket strategy, the importance of a pension or income flooring and annuity laddering and how to combine them: Is it possible to combine a bucket strategy with income laddering after retirement?
Ideally, both 8 and 9 should be incorporated from day one of retirement planning to ensure we do not underestimate the amount required. This is implemented in the freefincal robo advisor tool.
10 Retirement corpus = 30X the threshold of financial independence, but it’s not quite there. The vicissitudes of the market and life teach us that simplistic notions of financial independence, like a 30X corpus, are far from enough.
We must tighten our retirement planning with zero or negative real returns (post-tax) after retirement. We must aim for a withdrawal rate less than 4%, preferably less than 3%. See: What should be my safe withdrawal rate for retirement?
11. Dreaming big: This is the time to aim higher. Can I hit a 100X corpus before retirement? Can I hold onto 60% equity all my life? Can I leave a legacy for my children? Can I build a platform with which my children can follow their passion?
12. Focus on how to spend time after retirement. Even if we do not need the money, gainful employment after retirement is essential for our health. So we must think about it and plan for it well. If we have a robust secondary income source, we may not have to dip into the corpus unless necessary! See, for example, How to build a second income source that will last a lifetime.
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
Podcast: 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.
This book helps young earners get the basics right from the start! It will also help you travel to exotic places at a low cost!
(3) Chinchu Gets a Superpower! for kids.
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
This is an in-depth exploration of vacation planning, including how to find affordable flights, budget accommodations, and practical travel tips. It also examines the benefits of travelling slowly, both financially and psychologically, with links to relevant web pages and guidance at every step. Get the PDF for Rs 300 (instant download)
How to profit from content writing: Our ebook is for those interested in getting a side income via content writing. It is available at a 50% discount for Rs. 500 only!