The closer you reach your retirement age, the more important a financial plan becomes because after you retire from work, the regular income will stop, and you will still need cash flows, albeit less, perhaps, to meet your daily needs. So, if you haven’t done it already, you may have to double down on your retirement plan to get your finances on track for old age. 

Financial planning involves saving and managing money in such a way that it generates optimum results to achieve your retirement goals effortlessly. One popular method is the SMART goal strategy, which stands for Specific, Measurable, Achievable, Realistic, and Time-bound. This model will help enhance your retirement planning. Here’s how:   

1. Specific:  

Retirement goals should be well-defined. Instead of having some vague goal such as “saving for retirement,” one needs to identify an exact target. For example, “I need to save Rs 50 lakh by the time I retire in 20 years” is well-defined regarding the amount as a target. Here, one can strategize how to achieve that amount of target and keep away from vagueness in his strategy to save.  

2. Measurable: 

There should be some measurable criteria for goals so that the progress towards the goals can be traced. A commitment like “I will save regularly” is not specific enough. Instead, a calculable target should be set, like “I will contribute Rs 5,000 monthly to my retirement fund.” This measurable approach helps you track your exact rate of saving, and thus, you can make changes to stay on target.  

3. Achievable: 

It should be achievable, considering the financial situation at hand. For instance, “I will save Rs 60,000 annually by cutting non-essential expenses.”  In this way, it assures that your savings scheme is workable without straining your budget and style of living.  

Also Read: Senior Citizen Savings Scheme Vs Senior Citizen FD: Which Is Better For Seniors?

4. Realistic: 

It may be ambitious of you to set a goal of retiring with the same monthly income that you earn today. But it may be realistic if it matches how much you can save and what returns you can earn on your investments. Setting realistic goals will help you reach your objectives easily.   

5. Time-Bound:  

Setting a deadline will bring a sense of urgency to track the progress of your investments and modify it if needed to achieve the goals. The goal must be time-bound, like “I will accumulate Rs 30 lakh in my retirement fund in the next 15 years.” It not only provides clarity but also assists in planning the road ahead.  

Besides setting SMART goals, another vital aspect to consider is your risk tolerance and time horizon. For example, risks would usually be lower in a short-term goal, as the investment will be short-term. A medium-term goal like buying a car could involve medium risk, as the investment horizon could be 3-5 years. For long-term goals, such as retirement planning, one may afford to take higher risks as the investments are for the long-term, and short-term market volatilities will not much affect the outcome.