When to start?

“The question isn’t at what age I want to retire, it’s at what income”
– George Foreman

What is Retirement planning all about?
Since when should we be thinking about a retirement plan and start executing it?
What should be the age to retire?
These are the queries that come to our mind when we think about Retirement.

What is Retirement planning?
Retirement Planning is the process of knowing the retirement goals, estimating expenses during retirement and executing them.
Now for retirement, we need to decide the age of getting retired. So, it varies from person to person. Some research says that working longer keeps us happier and increases longevity also, whereas another research published by the National Bureau of Economic Research found out that: retirement improves both health and life satisfaction.

So, Retirement is not all about no work and only enjoyment of life, it is a stage where we should have enough savings which will support us till we are there, if we don’t work. So, when we acquire this amount we should start enjoying our Life to the fullest and we should not run after money. This is the stage when we should not have any liability.
For calculating the Retirement corpus, we should have an age which is known as Life Expectancy, the age when we want to retire, and today’s expenses (excluding all the expenses related to other family members).

When we get to know the Retirement age, then the time left for Retirement becomes the tenure for our Investment. For example, Sandip aged 26yrs wants to retire at the age of 50. So, the tenure of his investment period will be 24 years (50 yrs-26yrs).

The second parameter which we need to know about is Life Expectancy. Now this depends solely upon the family history or as per need of the individual. According to our calculations we take the age of 75. This age should be taken as much higher as we can, or else we may be short of the retirement corpus.

In the case of Sandip, he should accumulate retirement corpus for 25 years (75yrs -50 yrs). Now comes how much Mr Sandip should save and that totally depends upon the present expenses which should exclude any expenses related to child upbringing or any EMI, because during retirement there will be no such expenses related to these heads.