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Neeraj Chauhan is a Certified Financial Planner and CEO of The Financial Mall. The Financial Mall is a financial supermarket & in operation for over 20 years. It manages total financial affairs of clients through wealth management and financial planning Process.

Sunday, January 22, 2012

Retirement Savings Strategies for 50 +

Today, Many age 50 and older have not yet begun to save for retirement or have amassed insufficient funds.

If you are in this age group and find yourself facing an underfunded retirement, it is not too late to take charge. There are plenty of things you can do—right now—to get on the right track. Here are some ideas:

What’s it going to take? First, you need to estimate how much money you will need in retirement. Once you have an idea of the amount, you can work toward fulfilling that goal. You may need 60–80% of your current annual income in retirement. Your financial planner can help you assess the best figures for your situation.

Work it, Friend! If your employer offers a retirement plan, contribute as much as the law allows. Many employers also match contributions, sometimes, by as much as 50–100%. Make sure you contribute enough to claim all of this “free” money, which can add up significantly over time.

Create a spending plan. In other words, make a budget. Many people think a budget will be restrictive, but look at it this way: You can spend now, or you can have the money to afford your dream adventures. It is very important that you pay down debt now and, furthermore, do not accrue new debt. Examine your spending habits and replace some of your discretionary spending with saving. Even as little as Rs 500 extra per week is a step in the right direction.

Take some initiative. On top of contributing to your employer’s plan, you can save even more by opening your own PF or NPS account. Contributions are made after taxes, but earnings and distributions are tax-free. You can also take some aggressive investment options like SIP in diversified equity fund.

Hang your shingle. Many people hope to start their own businesses post retirement. But why wait? If you begin your entrepreneurial efforts now, your business has the potential to be in full swing by the time you do retire, and any profits between now and then can be added to your savings.

Move it or lose it. It’s very likely that your home may have significantly increased in value since you first bought it. You may have already paid off the Loan. With children at or near adulthood and living separately, do you really need that extra space? If not then Selling now and moving to a smaller, more affordable location will allow you to transfer the equity in your home into a savings vehicle.

Why quit? If you want to cushion your retirement savings, consider staying on the job longer. Many people actually leave retirement to reenter the workforce because they feel more fulfilled in a working lifestyle. Others seek part-time work, consulting, or entrepreneurial endeavors. If any of these scenarios resonate with you, you will earn more money each year to save, and you may be able to put off drawing down your savings.

Regardless of which options you choose, time and compounding will be to your benefit as you save. Each year that your savings remain untouched allows more time for growth potential. The new generation intends to redefine retirement as we know it. With a few steps in the right direction, you will have the resources to usher change into a whole new era.

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