Retirement is a phase of life where an individual bears the fruit of his saving which he has toiled for in the 20-30 years of his working life. It is the golden phase of one’s life provided it is well planned and provided for. Financial planning at this stage of life assumes a totally different meaning. Below are enlisted few steps in retirement planning:

Take a stock of where you are

To enjoy a comfortable retired life it is important that you start planning for retirement from the time you are in your 30’s.First of all take Stock of where you are and estimate what your requirements would be in say the next 20 years of your life. Start by making a realistic estimate of expenses during retirement. You can estimate this by using a percentage of your current income. However this may not be very accurate as it doesn’t take into account inflation and financial situations.

A more reliable method would be to think about the lifestyle you plan to have during retirement. Do you plan to travel or take up an expensive hobby? How much will it cost? Make a projected budget, keeping in mind that some costs (such as health insurance) are likely to increase, and some costs (such as your mortgage and costs associated with working) are likely to decrease or go away altogether.

Determine If You’ll Meet Your Goal or Fall Short

Once you have an estimated of expected expenses, determine approximately how much your assets will be worth at retirement. Next, estimate how long your retirement assets are likely to last, considering your projected expenses and income, the return you expect to earn on your assets, and your life expectancy. With the above information in hand, you will have a pretty good idea of whether you can expect to meet your goal or fall short. If possible, increase your retirement contributions to 15% or more of your income.

Evaluate asset allocation of your portfolio

As you enter your 40’s it is time to look at your asset allocation.  Obtain an estimate of your Social Security benefits from the Social Security Administration based on your expected retirement date. Benefits are reduced if you take early retirement. Research your Medicare options and be sure to enrol. If you are planning to retire before the age of 65, be sure you have medical insurance to cover you until you’re eligible for Medicare.

Financial planners advice to have a healthy mix of debt and equity. The idea is to build a portfolio which is safe and generates a steady monthly stream of income. Multi-asset exposure is key to financial success.  Like for instance with inflation eating into the money’s worth, it is important have some inflation beating instruments such as equities in the form of index funds in one’s portfolio. Evaluate your investments in terms of riskiness, liquidity and returns. Ask yourself question like Are you being too conservative by putting a large portion of your assets in fixed income investments? Are you taking more risk than you’re comfortable with by investing too heavily in stocks or mutual funds? Do you have enough liquid assets in your portfolio.

Put a share of your total wealth in fixed-income instruments that will generate frequent interest income equal to your monthly bills.

Please avoid unregulated and unrated schemes, which promise high returns. As a rule of thumb if an interest-bearing instrument promises to offer a return close to double the return of a reputed bank’s fixed deposit for the same tenure, avoid it.

Also decide on how you’ll take your retirement assets. Will you consolidate all of your investments for ease of recordkeeping? Will you take a lump sum distribution or an annuity? The order in which you withdraw your funds can have a significant impact on taxes. It is advisable to consult a tax advisor before making this decision.

Joint Accounts and Nominations

Joint holdings are advisable purely for operational ease. Also make sure that all nominations are in place and in favour of the persons of one’s choice to ensure smooth transfer of ownership. It is   however better that the right of the nominee comes into existence once the account holder is no more.

Record of all investments

It is advisable to create a databank of financial assets and the insurance cover for them. Let your family members or a close friend be informed of its whereabouts.

Other issues to consider include a review of your estate plan, including a will, power of attorney giving the person you designate the power to make financial decisions in your behalf if you become incapable of doing so yourself, and a living will outlining your wishes regarding lifesaving treatments in the case of serious illness or injury. Consult an attorney for developing these legal documents.

Last but definitely not the least step is to live your retired life to the fullest. After all you have earned it.