Finance

How Much Money Is Enough to Retire at 40 in India: A Complete Guide to Retirement Plans

How Much Money Is Enough to Retire at 40 in India

Retirement is something on which many people start working from a very young age, yet many of them fail to make adequate planning to live a comfortable retired life. Many would think that enough has been preserved or they have plenty of time to make retirement plans until they get older. In reality, retirement planning takes year-long commitment and persistence. The sooner you start, the happier and comfortable your retired life would be.

So, if you are planning to take a break or stop working to enter into your golden life period, take a look at some important personal financial management techniques that can become your life saviour. If your retirement is around the corner or is about to come, you must take note of a bunch of retirement-related topics to make some smart moves like keeping costs down and nesting as long as possible.

Calculate expected healthcare costs for comfortable retirement

To plan easy retirement, let us start with assuming that everyone one of us require healthcare expenses particularly in the later stages of our life. Failing to plan healthcare can make our retirement disastrous and steep. Fortunately, we are living in an era where various ways can help you in shrinking your healthcare costs like Mediclaim and Insurance. Be fit and healthy as long as possible and see your doctor regularly to ensure risk-free life. 

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You can choose using Flexible Spending Accounts (FSAs) that can help you in saving taxes. Other ways to catch money easily is Health Savings Account from where you can withdraw money penalty-free. Read about different Medicare plans available for every age. Many of them offer great coverage from the beginning of 65 years of age. Do not be late in starting Medicare since the longer you take the more companies will charge.

Learn money management techniques before retirement

Factors related to inflation must constitute an important factor in your retirement plan. If your retirement is still far like 20 years from now and you plan to save a certain amount for it, it must be understood that the saved amount will not value the same after 20 years as it does today. In an average, 3% inflation is expected each year and sometimes it is much more. This kind of shrink in the buying power can hinder your money management. Therefore, we recommend to include inflation in your retirement planning so that you get a strong purchasing power later in your retirement life.

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One way to combat the inflation issue is by holding stocks that pay a dividend at regular intervals. Such stocks tend to increase by value year by year and can prove to be beneficial to keep up with inflation. The price of such stocks also tends to increase with and can give you high returns on investments. Another safer way is to invest in bonds and mutual funds that make rate adjustments according to the inflation and stock value.

Invest in social security for safe retirement

You must know how much money you can expect from social security as it can become an important means of earning for later life. Although this amount might be sufficient to live a decent life, you must start planning, saving and make investments as soon as possible. If you earn more than required income from your work life, you will gain more in your retirement life through investments made of surplus money.

To get a better knowledge about social security investment plans, you can check the social security administration official website which will provide you with the required information and type of social security schemes available according to your age. You can calculate the amount of claim and benefits provided by social security schemes. Although social security schemes may offer less than other benefits, it is one of the most secured ways to invest upon. Coordinating with your spouse in social security schemes often boosts the total amount in the retirement phase.

When you have saved enough to retire

Now, let us assume that you have saved enough money that can make your retirement comfortable. For retirement, a comfortable sum of money is the income that you have kept aside through investment. This is also calculated according to your lifestyle, location, expected longevity and health.

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To determine whether or not you have made enough savings for your retirement, try thinking about your savings from annual income instead of a big cash amount. As a rule, we must always aim to live under 80% of pre-retirement income. You might require more than expectation post-retirement sometimes than pre-retirement. For example, if you plan an international trip, you may need more money. Similarly, if poor health is suspected and your later life seems to require costly care, you may have to save more. Eventually, if you expect that your retired life will be mostly spending time on reading, walking, gardening, or making friends, you may need less. Consider all the sources of income and never hesitate to add more sources to it like passive income. Some safe income sources include social security, pension schemes, rental property and dividend income.

If you have saved enough that can somehow make your retirement easier

Many people are approaching retirement and have saved nearly enough to satisfy retirement needs. Now, what do you need to do? Well, you have a few options that can get you covered. One simple way is to delay your retirement until you save enough to make it more comfortable rather than satisfying. Continue working where you work or find someplace that needs elderly people like accounting firms. This might provide you with many benefits like saving more and investing more for later life. Delaying retirement means more active years. Your retirement nest will have a longer time to develop and sustain. One of the most important benefits is you can enjoy health insurance that is employer-sponsored for a little longer and save some money here.

To make sure that you get work post-retirement or extend your work-life further, you can try some pre-retiring job for a few years. See if you can cut back some time from your current job or utilise weekends. By any means, try to generate some extra income on the side. There are many side incomes jobs available you can try according to your expertise. For instance, driving for ride-sharing firms, tutoring kids, selling handicrafts online, freelance work or pet-sitting at the weekends.

If you haven’t saved enough for your retirement

Some people may get engrossed so much with their present life that they forget to consider saving for the future. If you are in the same condition, believe me, you are not alone. So, what can be done in this case? Well, the best would be to postpone your retirement if you can manage your work-life for few more years. Try to work at least for some years or months until you are 70 at least. It is the age when social security investments stop growing and you can start taking them for your good. Think out of the box now. You can rent a portion of your home or car. You can also reallocate yourself to someplace else in the country where it is less costly and rent the costlier house.

What are annuities and how they can help in your retirement?

Annuities are always a good option in retirement plans. One downside of annuities is that the money you spend to buy them will be typically gone and cannot be left for your heirs. But, in return for annuities, you receive regular income after a certain age for the rest of your life. Usually, fixed annuities prove to be one of the best and safe option as it starts paying you immediately or as per deferred basis at an age when you specify. On the other side, annuities can sometimes be more rigid in terms and might not be good in comparison with other pension schemes.

Early retirement pros and cons

Many people might not save enough for their retirement yet plan to retire early whereas others may have saved enough and had made aggressive investments to lead a comfortable retired life. Such people can retire early easily as compared to the former ones.

If you are amongst those who have decided not to retire early, give it some consideration. We all live once and do not know how long we will live. You might consider collecting social security after the 60s and retire after sufficient income have been accumulated to live upon. Early retirement in some cases tend to be a better option than the later ones as people learn to live an active and enjoyable life from past times such as gardening, golf, travel and games. By ramping up your investments and saving, you can retire at a young age. So, reach out for your retirement goals as soon as possible so that your future life is full of excitement and merry time.

Non-financial aspects of retirement

When you plan to retire, you need to think outside financial boundaries too like how you will spend your days without work. Many retirees, in fact, feel restless and even depressed when they no longer have a structured workday ahead. Many people feel lonely as they have lost opportunities to socialize with others as well. Overall, you need to think of ways that can keep you socially and physically active even after you retire. You can take part in some activities pre-retirement that can help you during your retirement transition. Staying healthy and mentally fit will keep you happier and contended besides keeping your healthcare costs low. Volunteering and exercising are some of the activities that keep up the retiree’s spirit.

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