The mere thought of retirement gives pangs of anxiety to several people. While some may see it as an opportunity to do activities such as leisure, spending time with loved ones, travel, indulging in a hobby, etc., others may see it as an ominous end of their reliable and safety net of regular income. Regardless of which side of the wall you are on, a robust financial plan that considers your future retirement goals must be adopted to ensure a comfortable life post retirement. This article aims to serve as an introduction to retirement planning and also explains the 4 L’s associated with retirement planning.
What is retirement planning?
It is the process of concocting a regular and steady stream of income for retired individuals who no longer have the safety of their jobs or business. This process involves understanding and identifying retirement goals and making relevant investment decisions to achieve them. In layman’s terms, the period of retirement is deemed as the end of the everyday struggle of a human being. Your retirement strategy must be devised after taking into consideration various factors such as your age, income level, risk appetite, retirement goals, etc.
The Four L’s in retirement planning
To fully understand, draft, and execute a retirement plan, you must take into consideration four critical parameters. Here are the four L’s that you must consider to successfully create a retirement plan
The objectives of this parameter are directly connected to one of the biggest risks of retirement income – outliving your retirement corpus. This parameter focuses on ensuring financial independence in the future so that you are not a burden on your loved ones. This aims for an individual to cover their basic expenses, including, but not limited to housing, healthcare, food, and other daily living expenses.
This objective requires an individual to have enough reserves for any unforeseen emergencies. These reserves must be liquid enough to cater to any home repair, family contingencies, illness, or random death of your spouse. Liquidity can also help you to fill gaps during an unanticipated market fall.
This objective focuses on maintaining an individual’s current standard of living. It also gives importance to the fact that an individual is able to enjoy their retirement with desired unrestricted expenses. Unless an individual is quite rich, this objective usually requires an individual to amp up their spending power. Saving and investing to achieve a substantial corpus will help you to enrich your lifestyle which will help you to do all the activities that you planned to do in your retirement era. This will also help you to shower your loved ones with gifts.
This objective aims to leave financial assets as a legacy for your subsequent generations or charities. Typical financial goals under this objective include supporting loved ones, charity, and political movements.
There are certain types of investment that can help you create a robust retirement plan and subsequently achieve a substantial retirement corpus. Some of these investments include mutual funds, National Savings Certificate Scheme (NCSS), Public Provident Fund (PPF), Post Office Monthly Income Scheme (POMIS), bank fixed deposits (FD), etc. Evaluate the investment options that best suit your portfolio and start investing for your retirement today. Happy investing!