Retirement planning may sound simple and easy, but it is easier said than done. To live a happy retired life, you need detailed long-term planning starting right from your working years.

But even the planning requires some basic groundwork that you will have to do. Here are the stages for that.

Stage I

To start with, you need to ask yourself some fundamental questions first.

1] When do you want to retire, at your usual retirement age or early? 

2] Will you continue to engage yourself professionally after your formal retirement and, thus, earn a living?

3] Will you have any source of income in your retirement years?

4] Do you have to care for dependants in your retired life?

Stage II

Once you have satisfactorily answered these fundamental questions, you will be arriving at the next stage – to calculate how much you need for your retirement.

Calculate your current income and expenses. Better still, tabulate your mandatory and discretionary expenses.

In your old age, some of your mandatory expenses now will not exist, such as rent, equated monthly instalments on car and home loans, children’s education, and so on. Some of your discretionary expenses, such as frequent holidays, eating out, etc., will also cease to exist.

Your living costs will also reduce, but your expenses on medicines could drastically increase. All these will require calculation. 

Stage III

This will bring us to the third stage of the planning – the income part.

Now that you know your current income, present expenses, and likely future expenses, you will need to know what should be your future income. 

Ask yourself the questions you have asked in Stage I and use the data from Stage II to arrive at a figure that you will need every month for your basic living expenses in your retirement years. Take inflation into consideration.

Do note that if you do not have a source of income, or any work that will help you earn, then you will need to create a source of income.

To create that source of income, you will have to make investments now, in your working years. 

Stage IV

This will bring us to stage four of retirement planning – making investments.

This will require a detailed calculation based on your current income, your mandatory expenses, your future goals, the surplus income you can generate after deducting all the necessary and discretionary expenses that you can invest, the returns you expect from your investments, and whether they will be sufficient enough to cover your goals, including your retirement goals.

Conclusion

Once you have answered these fundamental questions, you can get in touch with a financial planner to further chart your investment goals and streamline your investments for your retirement and other needs.