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Retirement is a serene stage of life where you leave your adult responsibilities behind and enter into a world of ease and comfort. It is a challenging task to decide when to retire. Without appropriate prior planning, things can take a U-turn as many factors contribute towards ascertaining your retirement readiness.

In this blog, we’ll learn about all those factors you need to consider while evaluating your retirement readiness.

What is retirement readiness?

Retirement readiness refers to how prepared you are for your life after retirement. It can be financially, mentally as well as emotionally. It is a process of analysing your income, setting your goals and laying down steps to achieve them.

It includes selecting investment decisions like getting yourself life and health insurance policies, creating liquid funds for emergencies, and planning to repay the debt, if any.

As already mentioned, there is much more to retirement planning besides the financial aspects, such as participating in social activities. But today, we’ll only learn about the financial part of it.

How to retire, when to retire, or where to retire is subjective to each individual. There is no one plan suitable for everyone. But asking yourself the right questions, taking professional help and planning accordingly will eventually help you make wise decisions.

Questions to ask to see if you are ready for retirement

What are my goals?

Imagine leaving your home without deciding where you wish to go. The same happens when you start planning your retirement without listing your goals. Hence, setting goals should be the foremost step toward planning.

Start jotting down answers to questions like where you wish to live, what kind of life you wish to live, do you have any primary responsibilities to fulfil, do you have any major travel plans, will you have any debts to be repaid and so on.

Once you note down the answers to all these questions, you’ll begin to create a picture in your mind. This picture will eventually help you decide what your income sources would be, how much you’re going to spend and whether any gaps need to be filled.

Also, it would help if you kept in mind that once you enter those golden years of life, you may also have to consider all other expenses. They can be getting yourself a monthly health check-up, funds for medical emergencies, money for children’s marriage and so on.

By what age should I start planning to be able to ready for retirement?

The next significant factor to consider is determining the age you want to start planning for retirement. The day you receive your first paycheck is when you ideally should start retirement planning.

Most financial experts suggest that the earlier you start saving for retirement, the better. It’s because compounding works like magic in growing your money when you start early.

Starting at a young age has two major benefits:

• You have more time to grow your money
• You can take more risks than you would at a later stage

Let’s understand this with an example. Suppose you started a SIP of Rs 5,000 each month into mutual funds, and that fund grows around 12% every year. After a decade, your corpus would be around 11.6 lakhs, of which you invested only Rs.6 lakh.

After 30 years, your money will grow almost to 1.7 crores rupees, of which your money invested is around 18 lakhs only. The rest is interest earned and the power of compounding.

Hence, you have fewer years to grow your money as you grow older. If you think you’re too late for this, remember that better late than never.

How am I going to support myself in terms of money?

You must note that the monthly expenses are almost equal, or you can say that 80-90% is equal to expenses before retirement. But you may not have a business/profession to sustain yourself.

It would help if you decided what sources of income would support you during your retirement. Currently, compared to previous generations, we don’t have access to pensions, and with the joint family on the decline, it is now essential to build a source of income that will help you after your retirement.

If you do not want to live stressful retirement days, start creating income sources today that would generate passive income when you retire.

The idea is to start creating an investment portfolio that’ll generate returns so you can live your life after retirement peacefully.

Why is retirement readiness important?

• You’ll get to know things in life which otherwise would never catch your attention
• You start to live your life in a systemised and organised manner
• You can optimise your income in the best ways possible
• You won’t be carrying a burden on your children
• You can live your best golden years of life because you’ve already planned well for it
• You tend to make better financial and life decisions

Final words

It would be best to ask yourself the questions mentioned above to analyse if you are ready for retirement to live the best and most comforting retirement years of your life. However, for wise financial decisions, it is always recommended to consult a specialist to be more specific about your finances before you retire.

We are building a tool to help you understand your retirement readiness by answering a few questions. Stay tuned!

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