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People who have just started working hardly think about retirement plans. This is common and especially who do recognize the importance of it and don’t want to be denied the spending fun of the present.

Retirement planning
Retirement planning

Some of the key points to keep in mind about how retirement planning affects living expenses both now and in the future are listed below.

  1. The first thing that affects both pre and post retirement planning is inflation. Milton Friedman said that “Inflation is taxation without legislation”. When we are planning for retirement we must take it into consideration and plan for the future inflation rate.
  2. Spending too high on the corpus of retirement can turn worse for you to go through the current spending mode. It is generally stated that after the age of 25, one must start saving and that is true. Too early or too late retirement plans will end up pressurizing you current debts and investments.
  3. It’s really hard to calculate the savings rate but mostly 10% is the minimum base rate of annual savings for the retirement corpus if you are starting it young (eg 25 or 27). Every ‘five year increase’ increases your percentage by 5%. This is dependent on your standard of living.
  4. Always consider some living expenses now to get the better future.
  5. Do try to have a 401 K or invest in a company’s retirement plan before you choose any other plan.
  6. Never opt out or miss payment of the corpus to be happy. Beware that practice of savings is mandatory to stay healthy financially for retirement days. The tendency to spend more on a holiday trip to Malaysia or giving a party in a 5 star hotel will give you nothing than a strenuous installment for the plan in the next financial year.
  7. Do not go further into debt in order to save for retirement.