"The only person who will take care of the older you someday is the younger your are today"
What is Retirement planning?
In simple words, retirement planning means planning your finances in such a manner that you can achieve your financial goals before and after you retire. For this, you need to analyse your current financial status, set realistic financial objectives and estimate the future cash flow.
Advantages of Retirement planning?
- Peace of mind- Planning ahead will reduce uncertainty for you and will help you be mentally free for your later years. Not planning can leave you uncertain with regards to your income after retirement thus creating stress.
- Getting on the same page- Some retirement plans are often affected by a saver’s desire to meet other objectives such as assisting an adult child in starting or acquiring their business. To the extent that these goals may affect your own retirement savings, you will benefit from planning beforehand. One of the benefits of early retirement planning is that you can make sure your plans work well with other relevant parties.
- Tax Benefits- There are several tax benefits of retirement planning, including reducing the amount of income taxes you will pay during retirement and ensuring that beneficiaries to retirement and other account types pay as little tax as possible. Sensible thing to do is tax diversification. This involves establishing different “pools” of money in accounts that are taxable, tax-free and tax-deferred. These different accounts allow income during retirement to be strategically withdrawn from a variety of sources depending on future conditions.
- Cost Savings- There are many ways to reduce costs with appropriate planning. Many of the insurance policies you may need (long-term care, etc.) can be acquired at a lower premium when younger and in good health rather than waiting until retirement and risking a higher rate or denial of coverage.
- Legacy Opportunities- Planning for retirement can also provide benefit to your heirs or your favourite charitable causes. You may also wish to contribute to charitable institutes. Planning your retirement ensures all your wishes are fulfilled in the correct manner.