There are some important factors you must consider for retirement planning, such as When do you want to retire? How much money will you require after your retirement? Can you a ord to retire early? How will you ensure steady flow of income when you stop working? Allow me to elaborate. Coming to the first point — when do you want to retire? Do you want to work for another 10 years? 20 years? 30 years? Or maybe even beyond that? Remember, one is expected to live beyond 80 years; so the earlier you retire, the longer would be the period for which you would need a pension. The second point is about — how much money would you need every month after retirement? This will be based on your day-to-day expenses for food, clothing and medicines. The nature of some expenses that are there currently may change. For example, school fees may get replaced with healthcare expenses. An important factor to consider is inflation. Let me explain this with a simple example. Say, today you buy 1 kg of rice for ₹ 50. In 10 years from now, with a 5% inflation, that will cost you ₹ 75. Imagine the shortfall in pension if you don't factor inflation into your retirement planning. This is what the calculation will look like at the time of your retirement if you are 30 years old today Current age = 30 years Current expenses = ₹ 10,000 a month Retiring at 60 years and planning till 80 Inflation = 5% Value of inflation-accounted expenses at retirement = ₹ 43,000 a month Monthly shortfall in amount needed for expenses if not accounting for inflation = ₹ 33,000 You can clearly see how critical understanding inflation is when planning for retirement 3. To answer whether you can afforrd to retire early, you'll have to figure out the amount you need when you retire. Continuing with the same example. You are 30 years old Your current monthly expenses are ₹ 10,000 Inflation is 5% Return on your pension investment is 10% You want your savings to last at least until you are 80 If you work till 60, you need to contribute ₹ 2,942 a month But if you are looking to retire at 50, you must save a lot more that is, ₹ 6,660 a month 4. To ensure a steady and adequate flow of income after your retirement, a key factor you need to remember is return on your pension investment If you want the returns to beat inflation, you should choose your investments wisely. Understand the risks and returns associated with various investment options. Say, you invest ₹ 500 every month. The estimated return on your pension investment at the end of 30 years will be different in the case of each type of investment. Fixed return investments such as bank fixed deposits are safer but give lower returns than market-linked investments. Only investing in fixed return at 6% per annum will give you ₹ 5,00,000. With an investment in equity at 12% per annum, you have a retirement fund of ₹ 17,47,482 You now know the factors that influence retirement planning, but how will you get down to actually executing it? Continue reading for the details. Building your retirement plan Alright, let’s get down to building your retirement plan. There are a couple of ways to go about it. 1. First, you need to figure out the amount you would need to save for your retirement. Wondering how to do that? Use a retirement calculator. You can decide the monthly pension you want The calculator lets you know how much to contribute based on your pension amount You can find the retirement calculator on the link www.npstrust.org.in/content/pension-calculator 2. Next, you have to assess your current situation. Consider how much you can save at your age with the money that you currently earn Start saving. Don’t worry if the amount is small. Save more later when you have the money Assess the risks you can take now. You can choose safe investments with small rewards or risky ones that may pay off big 3. Lastly, explore different pension plans Check if the plan provides a pension (NPS, insurance and others) Check if the plan helps you receive a guaranteed pension Find out which asset classes your pension plan invests in Once you've reviewed the different types of plans available and understood the financial benefits and risks involved then make your decision. Also, I am always there to guide. You can contact me, your PFRDA support, on the call center numbers 1800110708 and 1800110069. You can also contact us for NPS and APY related queries on 1800222080 and 18008891030 respectively Moneyram Mantra Building your retirement plan begins by understanding how much you can save based on your estimated expenses and current age. Figure out the options you have for your pension investment. Understand the risks and returns for the various options