Retirement Planning: How to Start Building Your Nest Egg

A few days back as I was scrolling through Face Book, 2 posts caught my attention.

The first post had been penned by a young working mother who wanted to save for her child`s education and also for her own retirement. The retirement corpus for her was to save enough so that she could leave her job and start a business based on her passion. I felt happy to see her put on the forward thinking cap.

The next post was about another lady. Her husband had passed away. There was not much of saving as the amount had been spent on the education of the child who is not willing to take care of the mother. This is the sad reality of our changing Indian society.

These posts clearly show the rising importance of a corpus to take care of our ‘retirement’ days.

As we celebrate India’s 78th independence, we also see the shift in the social and economic dynamics of Indian society. The enhancement of medical facilities has reduced the mortality rates. The basic question that comes to mind is how the aging population is planning out its survival. More so, as the traditional joint family system has been replaced by nuclear families, children are flying the nest for professional opportunities, and of course the ever-escalating divorce numbers.

In the scene of rapidly dwindling social and economic support, how do we perceive the security of our future?

Here comes the question of retirement planning. I am not speaking of the official age-related 60-year retirement. I am talking about the time when we wish to pursue our passion/desire unrestricted by external factors.

When considering the ground root realities, money does count, no matter how philosophical we tend to become at times. The real concern is how we build up a corpus. Do we want to rely on our children for money? No. As young people, do we want to take it from our parents? No.

This is where retirement planning comes into play. It’s not about how old or young we are; it’s about building up a corpus as soon as possible. Just as there is no set age for retirement today, there is no set age to start planning for it.

How do we start? Let’s begin with the basic financial rule of 50/30/20. In my previous article, I discussed this rule in detail.

Fifty percent of earnings are spent on basic necessities, while 30% and 20% are allocated to wants and savings, respectively.

How do we save this 20%? Depending on the country we reside in, we can allocate assets between riskier and guaranteed options. When we’re younger, we have a greater risk appetite, so we follow the 60/40 rule.

We allocate 60% of our savings to equity and 40% to debt instruments. As we age, the percentage shifts more in favor of debt instruments.

For those of us in India, an allocation between mutual funds and pension schemes works wonders.

In my 20+ years in the insurance industry, I have seen how life insurance plans have added value to the lives of my clients along with the other asset class diversifications they have done.

Peace of mind is what we seek, and retirement planning is one key factor that provides it. Just as Rome wasn’t built in a day, building a corpus also requires disciplined and regular saving habits. However, once this disciplined savings journey begins, the benefits become evident.

Developing a retirement savings plan by determining our retirement goals based on the calculation of our retirement income needs is what makes it effective.

-Soma Swagata Basu is a life insurance consultant specializing in Personal Savings, Child Education, and Retirement Planning, with over two decades of experience.