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Reviewed by Jul 18, 2022| Updated on
Retirement planning is the process of setting retirement income goals and the actions and decisions necessary to achieve those goals. Retirement planning includes identifying sources of income, estimating expenses, implementing a savings program, and managing assets and risk.
Retirement planning is being prepared for life after paid working period ends financially as well as all other aspects of life. The non-financial aspects include lifestyle choices such as spending time during retirement, a place to live, designated time to completely quit working, and others. A holistic retirement planning considers all the areas with equal importance.
The level of emphasis on retirement planning varies throughout different life stages. During the youth, retirement planning only means setting aside enough funds for retirement. During the middle of the career, it might change to setting specific income/asset targets and taking the necessary steps to realise them. Once you reach retirement, decades of savings will pay out.
Stages of Retirement Planning: 1. Young Adulthood: Those who are entering an adult life may not have a lot of money to invest, but they can have enough time to let investments mature. It makes a critical and valuable piece of retirement saving. Such investments can make up a large piece of investments with regards to the principle of compound interest. Compound interest allows interest to be calculated on interest the more time you have, the more interest you will earn. 2. Early midlife: *This age can bring in a lot of financial stress in terms of mortgages, student loans, and insurance premiums. Therefore, it may be difficult to save in this period. 3. Later midlife:* When time is running out to make up for the difference in the actual savings and retirement plans, you will have the last opportunity to fill the gap. Since you will have higher wages and most of your debts would be fulfilled, you can have a larger sum available for investment.
The availability of cash in the future is estimated to determine if the retirement income goal can be achieved. Some retirement plans change depending on your location. It is, ideally, a life-long process you can start at any time. However, it is a general notion that it works best if you factor it into your financial planning early.