I travel nearly 60 Km every day commuting between my office and home. Several lakh people will be doing the same in a city like Bangalore – people travelling from suburbs to central district or one part of the city to the other to reach their offices or tech parks.
Is work from home a solution? If work can be shipped out of one continent to the other for cost benefit, why not from the office to the home? There are many a types of work which can be done from home without compromising on data security and other confidentiality related issues. Technology is already available. Corporate entities and goverments through proper regulation and tax breaks should enable this and accelerate the process.
The moment we join employment force, be it on hire or self employment, the retirement clock starts ticking. We are certain that we retire from employment after several years. Also, those of us who are employed know the year in which we retire by default. Some may choose to retire early and some may be willing to accept extension of retirement age through contracts. This implies that we have ample time to plan for this important event in our life.
While it is important to know how to plan for retirement, it’s equally important to understand why to plan for retirement.
Once up on a time, Government job was much sought after for retirement benefits it entailed. How times have changed! Under the current dispensation, a government employee has to contribute her money for retirement fund, similar to a private sector employee. Job related social security benefits like provident fund, family pension and gratuity will never be able to fund substantially the retirement corpus.
Modern health care and increased financial resources have contributed to increase our longevity. We not only live longer than any time in our history and lead an active life too – so much so that our retirement life would be longer than our period of employment. So we have to fund a longer retirement period through shorter earning period!
Then there are unforeseen medical and long term care expenses. Old age typically brings medical problems and increased healthcare expenses. We may also would like to pass on inheritance to our children. Without a well planned retirement corpus, we may be forced to sell off the assets to generate the required cash; even worse we may become financial burden to our children during old age. Many families have adopted single child policy and this makes us even more vulnerable during old age.
Last but not least, inflation has a killer effect on our standard of living. If not taken in to account while planning retirement needs, inflation will punch holes to our best plans.
Who does not want retire comfortably? But we need to find out what is “comfortable retirement”?
The goal of Retirement Planning is to allocate the financial resources available so that we can plan for a financially secure retirement.
After understanding ‘why’ of retirement planning, let us look at ‘how’ of it. When we start planning our retirement, we have to answer the following questions:
Ø How Much Will I Need?
Ø Where Will My Money Come From?
Ø How To Investment For Building A Nest Egg?
Ø What Are The Tax Implications And Effect Of Compounding
Ø What’s Importance Of Asset Allocation And Diversification
Ø How To Review And Perform Course Correction
A Certified Financial Planner is specially trained to look in to our financial future and plan for such eventualities. He has the wherewithal to peek in to the likely future based on our risk appetite, time horizon, existing asset base and such several variables.
Consider the following situations:
1. You are changing the job and there is a gap between leaving the existing job and joining a new job.
2. Due to high costs, employer does not provide cover to family members or limits the amount of cover.
3. You do not like the current job and have no job in hand. You would like to take a break.
4. You want to pursue higher studies; though you are likely to be hired again once your study is finished, as of now you are not an employee and consequently employee related benefits are not available.
5. You would like to retire early. Employer provided cover ceases and you have to buy a cover yourself. You may be uninsurable because of existing health situation or pre existing conditions may not be covered or premiums could be exorbitantly higher.
6. You would retire at the age of superannuation. Employer provided cover ceases and you have to buy a cover yourself. You may be uninsurable because of existing health situation or pre existing conditions may not be covered or premiums could be exorbitantly higher. Even worse, you may not be provided with a cover because of age limitation. When you need an insurance cover most you will be denied that option.
7. You are fired from the job because of health/disability reasons. You neither have a job nor an insurance cover.
I have personally come across people struggling to manage in the above situation.
What’s the alternative? If you do not link insurance and investment, you have several choices. Term insurance in case of life insurance and family floater plans in case of health / personal accident / disability cover.
If you are an employee who is complacent with employer provided cover, think again. Talk to a financial planner today to assess your situation.