Financial Planning for Retirement:How to Plan Your Finances If You Are Considering Early Retirement
Strategic Financial planning is very important while taking life changing decisions. Considering early retirement is a big step in life. If not properly decided your pension plan or choosen the appropriate pension scheme, you may end up regretting your idea of early retirement. You also put yourself in a situation to search for a job again. You should very well know how to cope up with the retirement income. Getting a job is not that easy in the current economic turmoil and the period of global recession. Even though the companies have policies against age discrimination, it is tough to get a job as one ages.
Read this article to learn how to strategically make your financial planning by investing well before considering early retirement. It may look simple while reading, but you will definitely reap benefits if this plan is implemented appropriately.
Income/Expense - Strategy Plan:
You need to develop a strategic plan by analyzing the 'current' and 'after retirement' income and expense ratio.
First Step - Study the current balance sheet to understand where exactly you stand with your current income and expense ratio. Let us consider this as ‘Phase I’
Second Step - Draw a plan about what you will be earning after retirement on monthly or yearly basis.This should include those income you might derive from all your short term and long term assets and investments.
Third Step - Draw a plan on how your income and expenses are going to change after retirement. This highly depends on the lifestyle you are going to have after retirement. You may reduce your monthly expenses with spending less on gas. At the same time, with the aging process, you need to consider the chances of increasing healthcare expenses.Let us consider this as ‘Phase II’
Fourth Step - Compare the Income-Expense ratio between your 'current' and 'after retirement' life - Phase I and Phase II.
Fifth Step - Now you will have a picture on how your financial life is going to be after retirement. If the expense takes a higher place in the ‘Phase II’ you may want to consider working part time or full time again after retirement.
If you end up with an option of working part time after retirement, start looking out for plans and options to invest well while earning. Annuities are one form of investments that can bring in cash flow after retirement. Understand the facts behind various annuity plans before choosing the right one for you.
There are open source finance softwares like 'Gnucash' available to make these calculations easily. Installing and accessing these softwares is easier, you can learn the methodologies quickly and make use of them to lead an uncomplicated life.
Strategize your investment plan to have a stress free life after retirement. Most of the times, you want to do things as you have always dreamt of like going around places and enjoying leisure activities after retirement, but postponing them due to the necessity of earning money. Invest well, enjoy your time and life well!