Retirement planning for Financial Freedom

Retirement Planning: A wonderful Journey towards Freedom

The market has made a significant rebound since the dip in March. However, we should still proceed with caution and be wary that all of the economic effects of COVID-19 have not been felt fully.

To have a comfortable, secure and fun-retirement, you need to build the financial cushion that will fund it all.

Planning for retirement starts with thinking about your retirement goals and how long you have to meet them. Then you need to look at the types of retirement accounts that can help you raise the money to fund your future. As you save that money, you have to invest it to enable it to grow. The surprise last part is taxes: If you’ve received tax deductions over the years for the money you’ve contributed to your retirement accounts, a significant tax bill awaits when you start withdrawing those savings. There are ways to minimize the retirement tax hit while you save for the future—and to continue the process when that day arrives and you actually do retire.

We’ll get into all of these issues here. But first, start by learning the five steps everyone should take, no matter what their age, to build a solid retirement plan.

5 lessons for investors from Dhoni’s successful career for Retirement:

1. Patience is virtue:

If you look at Mahendra Singh Dhoni’s 16-year-long cricket career, you will notice how he remained calm during the most crucial moment in a match. He is not touted as India’s best finisher for nothing.

Being patient during times of uncertainty in the markets is the key. Your investment in small-saving schemes or bank FDs or stock depends on several factors. Whether it’s a job loss or sudden market crash, you have to remain composed while handling your investments. If one stock of yours does not perform well, don’t panic. You will always have the option to switch it considering your financial goals.

2. Ups and downs, part of (investors’) life

Like everyone else, Mahendra Singh Dhoni had ups and downs in his career. The 39-year-old cricket star debuted in the ODIs in 2004-05 with a duck. But he did not let one bad performance affect his career. “Ups and downs are part of a player’s career. What is important is how you come back into form after a lean patch,” the Ranchi born cricketer once said.

Similarly, a bad day should not affect your investments. If you consider all the factors before an investment, be confident about achieving your goals.

3. Have faith in yourself:

If you are an avid cricket fan, you must remember the time when MSD handed the ball to Joginder Sharma during T20 World Cup final in 2007. Remember how Dhoni sent Rohit Sharma to open before the 2013 Champions Trophy in England? MSD has always believed in himself on the field.

While making investments, if you are convinced about an asset, fund or scheme, go ahead with your belief. It is important to do research before any investment, but you should also have faith in your investment decisions. You can also take help of an advisor and monitor your fund’s performance.

4. Know your strengths

Mahendra Singh Dhoni knows his strengths and always sticks to them on the field. “He is a great competitor and keeps his composure better than anyone, especially under pressure. He is a very smart player, who is calculating,” Australian cricketer Michael Hussey once said.

Knowing your strength can also help you in the financial markets. One should keep a tab on own their budget, goals and investments than blindly following expert views or market trends.

5. The right guidance:

Football was Mahendra Singh Dhoni’s first preference during his school days. He used to play football for his school team. Keshav Ranjan Banerjee, the cricket coach at the DAV Jawahar Vidya Mandir school in Ranchi introduced ‘footballer’ Dhoni to cricket. Over the years, several coaches have trained Mahendra Singh Dhoni and helped him to achieve all the success.

In personal finance too, a financial advisor can help you find the right investments to reach your goals. Financial advisors offer unbiased advice while investing. So a little guide can help you to go a long way.

 

KEY TAKEAWAYS

1. Retirement planning should include determining time horizons, estimating expenses, calculating required after-tax returns, assessing risk tolerance, and doing estate planning.

2. Start planning for retirement as soon as you can to take advantage of the power of compounding. Start investment at an early age and only with the advise of Financial advisor.

3. Younger investors can take more risk with their investments, while investors closer to retirement should be more conservative.

4. Retirement plans evolve through the years, which means portfolios should be rebalanced and estate plans to be updated as needed.

 

Don’t make Retirement planning a boring part rather make it an exciting process and become free from worries about future financial issues and enjoy life with freedom !!

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Investments a smart move as compared to savings

Savings refers to that part of disposable income, which is not used in consumption, i.e. whatever is remained in the hands of a person, after paying all the expenses. For example, Monthly income of Mr. A is Rs. 50000 and his monthly household and other expenses amount to Rs. 30000 so ultimate Savings of Mr. A, money remained in his hands, amounts to Rs. 20000 in cashor Bank savings account.

Savings are defined as the part of consumer’s disposable income which is not used for current consumption, rather kept aside for future use. There are several ways through which a person can save money like, accumulating it in the form of cash holdings, or depositing it into the savings account.
The stepping stone of wealth formation is savings, which is decided by a person’s level of income. The higher the income of a person, the higher is his capacity to save, because the rise in income increases the propensity to save and decreases the propensity to consume. It can also be said that it is not a person’s ability to save that encourages him to save money, but the willingness to save forces him to do so. The willingness depends on some factors like his concern or financial background, etc.

On the other end, Investment is the act of investing the saved money into financial products, with a view of earning profits. It indicates the increase in capital stock. For example, Monthly income of Mr. A is Rs. 50000 and his monthly household and other expenses amount to Rs. 30000 so Mr. A invests remaining Rs. 20000 in Mutual funds. Thus, Rs. 20000 is Investment and another income source for him.
For an enterprise/entity, investment implies the production of new capital goods, such as plant and machinery or change in inventories.

The process of investing money saved is known as an Investment. It could be anything, i.e. money, time, efforts or other resources that you exchange to earn returns in future. When you purchase an asset with the hope that it will grow and give good returns in the coming years, it is an investment. Present consumption should be foregone to obtain higher returns later.

The ultimate purpose that works behind the investment is the creation of wealth which can be in the form of appreciation in capital, interest earnings, dividend income, rental income. Investment can be made in different investment vehicles like stocks, bonds, mutual funds, commodities, options, currency, deposit account or any other securities or assets.

As investment always comes with a risk of losing money, but it is also true that you can reap more money with the same investment vehicle. It has a productive nature; that helps in the economic growth of the country.

Money if invested in mutual funds, will be invested in different industries and can help industries grow and ultimately Indian economy will grow and with good Industry returns, the person investing money will also grow.

Savings = Money is Idle/not invested
Investments = Money Makes more Money by generating returns
A smart way to generate Passive Income
Understand why Investing is the only way to grow Savings.

Comparison Chart

BASIS FOR COMPARISON SAVINGS INVESTMENT
Meaning Savings represents that part of the person’s income which is not used for consumption. Investment refers to the process of investing funds in capital assets, with a view to generate returns.
Purpose Savings are made to fulfil short term or urgent requirements. Investment is made to provide returns and help in capital formation. Help Creating Wealth.
Risk Low or negligible Very high
Returns No or less Comparatively high
Liquidity Highly liquid Less liquid

Savings, alone cannot constitute to the increase in wealth, because it can only accumulate funds. There must be the mobilisation of savings, i.e. to put the savings into productive uses. There are a number of ways of channelizing savings, one of them is an investment, where you can find limitless options to invest your earnings. Although risk and returns are always associated with it, but when there is no risk, there is no profit.

5 key differences between saving and investing:

1. Period

Savings are typically for small financial objectives to be met in short periods of time, say about 1-3 years! If you’re looking forward to buy mobile phone or to go on a small domestic vacation in near future, saving might be a good option to meet such objectives. On the other hand, investing is typically a long-term plan for bigger financial goals. Say you’re planning for your child’s education or wedding or your comfortable retired life which is due in about 5 or more years ahead from now, investing from now can make these goals achievable by the time of need.

2. Access to money

At time of critical need of money savings serve as handy cash. You have all the access to your money in savings. You may withdraw a part of your savings or the whole amount as per your wish but at times, you end up spending money you have easy access to. In case of investing, access to your money depends on the kind of investments you make. Mutual funds schemes require long Investment duration to generate consistent returns to beat inflation.

3. Risk

If you have savings in reputed banks your money is safer in the bank accounts than at home. Investing mediums may involve risk of possible potential returns pertaining to the term of investment or the market situations. Investing in equity market comes with an inherent risk. One might lose money if not invested in quality stocks with long term growth potential companies. Hence it is advisable to avail services of expert financial advisors. Risk in investing varies according to the channels of investments. If your money is invested in good quality companies with long term views, then short term ups and downs should not affect your outlook towards such investments. Mutual fund provides the scheme details thereby indicating the possible risk involved. Investing wisely may give returns much higher than savings in the long run.

4. Returns

If you have savings in reputed banks your money is safer in the bank accounts than at home. Investing mediums may involve risk of possible potential returns pertaining to the term of investment or the market situations. Investing in equity market comes with an inherent risk. One might lose money if not invested in quality stocks with long term growth potential companies. Hence it is advisable to avail services of expert financial advisors. Risk in investing varies according to the channels of investments. If your money is invested in good quality companies with long term views, then short term ups and downs should not affect your outlook towards such investments. Mutual fund provides the scheme details thereby indicating the possible risk involved. Investing wisely may give returns much higher than savings in the long run.

5. Choice

The right thing is to first identify your purpose. Why do you want to save or invest your money? Check whether your goals are short term or long term. It’s always wise to save money for small term goals, emergencies and casual expenses as it provides quick access. This makes it easier to meet small goals.

But in the long run, consider your changing needs, limited income sources and inflation; savings may fall short for bigger financial goals. Remember you are planning for future. It’s advisable to start investing at a young age but it’s never too late.Savings are for the present and investments are for the future. Investments are made typically for bigger financial goals which may seem impossible now but would be possible in the time to come if they are wisely planned today. Investing smartly is the key to meet such goals. To conclude, your dreams don’t follow inflation rates. It is recommended to save for small term goals but investing simultaneously may make it simpler achieve your long term dreams.

Never depend on single income. Make investment to create a second source. – Warren Buffett

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