Why is retirement planning important for attaining financial freedom?

Planning for your sunset years is essential. Retirement planning and financial planning go hand in hand. When you are making a financial plan and prioritizing your short term and long term goals, retirement planning should top the list of your long term goals. That’s because when you are young, you do not need that much money to survive. But when you retire, you are living on a fixed budget. Your only source of income will mostly be from a pension scheme and whatever money you accumulated through Employee Provident Fund (EPF). But will this much money actually be enough for you to remain financially independent during your post retirement life?

Here’s why we feel retirement planning is essential to attain financial freedom:

Savings is more important than wealth

If you feel that you are wealthy enough at this point of time in your life and do not have to worry about the future, you may have to reconsider that opinion. Financial freedom is far more important than wealth. That’s because there are no restrictions when it comes to spending money. Today you have a crore in your bank account, tomorrow you may only have a few lakhs and a week later, a few thousands. Wealth is only temporary and if you really want to attain financial stability and freedom, you may have to start saving more often. If your outflows are superseding your inflow or your income, then we have some serious problems to address.

You need to take care of your and your family’s health expenses

Of course you children will be all grown up and independent by the time you retire. You might not have to take care of them, but you have to take care of your as well as your spouse’s expenses. And the biggest expense during old age is healthcare. Healthcare related expenses have been on the rise. So just imagine how much an occasional visit to the hospital would cost twenty years from now. If your employer doesn’t offer reimbursement for its retired employees and if you do not have a solid health plan, you need to have a wealthy retirement corpus to take care of all your medical expenses. For this, attaining financial stability is of utmost importance.

Continue with the same standard of living

At this point of time, you and your family might have gotten used to a specific standard of living. You can afford to live this way and enjoy the luxuries of life because you are earning and have a decent job. But have you thought about what you are going to do when you retire? With no salary incoming, how are you planning to manage to continue to live the way you do now? You have to get used to living on a fixed budget. Is your family willing to do that? If you want to make sure that you continue living the way you do even after you retire, you need to make sure that you build a wealthy retirement corpus.

Now that you realize the importance of financial freedom, have you thought of how you are going to achieve it? One way to go is investing in solution oriented mutual funds. Mutual funds can be one of the ways to systematically invest. Thanks to a powerful investment tool like Systematic Investment Plan (SIP), one can now invest small fixed amounts at systematic intervals and continue doing so till their investment objective is achieved. If you do not know how much money you need to invest regularly in order to attain financial freedom, you can take the help of an online SIP calculator. However, mutual fund investments do not guarantee returns. So investors are expected to determine their risk appetite before making the final investment decision.

Mutual fund investments are subject to market risks, read all scheme related documents carefully