Practical Aspects Of Retirement

There are many books that have been written on the subject of practical aspects of retirement planning. In addition, there are numerous articles in various magazines as well as on the internet that touch upon the subject in great depth; yet there is no one single formula that can define the practical aspects of retirement in totality.

Most people who write on this subject have either studied it thoroughly or have been through the retirement procedure personally. However, to grasp the finer points and give a bird’s eye view on the subject it is essential to know a few facts.

Planning Of Retirement Date

For those who are working for various companies, the date of retirement is predetermined based on the individuals’ age as well as the post that he or she holds. Working on these dates as general guidelines, one can work out a financial model that provides for their retirement days adequately.

While working out the financial model it would be wise to take the help of a financial adviser or someone who has adequate knowledge on the subject of retirement planning.

For those not working for the companies or those desirous of leaving their job prematurely, the “golden thumb rule” about the retirement date is that at the time of retirement – “your overall income that includes sources of passive income as well as accrued income should be more than your present cost of living. It should also include a certain percentage as adjustment factor”.

Although the thought of early retirement might appeal to many but one should do so only when they have adequate resources to generate this amount of income.

The terms mentioned in the “golden thumb rule” listed above can further be amplified as -

• ‘Accrued income’- includes the monthly pension amount that your organization offers after retirement as a part of the perks of the job.

• ‘Passive income’- includes the interest that you get in the form of interest or dividends from the various types of investments that you have made all your life. This includes property, dividends, savings etc.

• ‘Cost of living’- means the expenditure that you would incur to lead your current lifestyle. While calculating this, it is advisable to be lavish in order to err it is on the positive side.

• ‘Adjustment factor’- generally applies to the changes that may happen in your circumstances, which would have an effect on your expenditure.

The role of the financial adviser is very important to work out any points that may not have been considered adequately. One must also make provision for inflation.

There is also a need to have some reserve amount to cater for certain recreational activities, holidays, emergencies or unforeseen requirements etc.

Besides this, there are a few other points that one must keep in mind while catering for retirement days-

• There should be no debt burdens. The mortgages should have been paid off, the agreements for car hire purchase or any expenditures should have been settled and there should been no liability of any sort.

• The planned expenditure must also include recreational activities and other such activities that you need to pursue as part of your “wish list”.

• The monthly income from your investments and other sources should flow uninterrupted. There should also be a reserve to cater for unforeseen eventualities.

• Not only this, one should also cater to saving some amount out of the monthly retirement income.

Once appropriately planned and conceived, it is easy to avoid the pitfalls of any mistakes, settle down in a comfortable retired life, and pursue your own interests.

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