Retirement Planning is the most important part of one’s financial planning.
Everyone has to retire one day. It is inevitable. During the sunset years of life, one is not in a position to maintain the same income levels which he has enjoyed in the active period of his life. But he wants to maintain his existing lifestyle pattern. And to maintain his ongoing life style, he needs adequate cash flow to fulfill it. Here comes the Retirement Planning which fills the gap between income and expenditure to maintain the necessary cash flow.
Following parameters are taken into consideration while designing a retirement plan.
i) Age of retirement
ii) Value of present assets and their future value at the time of retirement
iii) Value of accrued assets to be acquired till the age of retirement
iv) Own house/Rented accommodation at the time of retirement
v) Demographic composition of the family – Husband and wife or with their children and their grand children.
vi) Different avenues of cash flow prevalent at the time of retirement and their nature.
vii) List of present expenditure like household expenditure and other expenditures like payment of interest on loans or and payment insurance premium both household and life.
viii) Present Income Expenditure Statement.
ix) Likelihood of future expenditure statement.
x) Gap between the future value of the in-tangible earning assets accumulated at the time of retirement and the future value of the expenditure likely to be incurred after the retirement.
xi) Means to bridge the above gap to maintain adequate cash flow.