Retirement is the golden age of your life. However, you can only enjoy a comfortable retired life if you have a large enough corpus to cover your needs during retirement. As a result, the most critical question to ask yourself is: am I on track for retirement? Are my savings plan and retirement planning equipped to take care of my and my family’s expenses after retirement? To ensure that you are prepared to shift from a working to a non-working life, assess whether your retirement planning is failproof. Retirement planning assesses your ability to the extent you can maintain your current way of living even after retirement. Here are three indicators that you are on track with retirement planning:

Significant retirement nest egg: The first technique to determine if your retirement is on track is to assess your retirement corpus. Your retirement savings, including NPS, savings plan, and back policy, should be enough to meet all of your expenses during your non-working years. For this reason, your retirement planning must be foolproof, and you should know exactly how much you will require for a financially comfortable retirement. According to experts, your retirement income should be equal to at least 70-80% of your current monthly earnings. So, if you make Rs. 85,000 per month now, you will need at least Rs. 59,500 to Rs. 68,000 per month in retirement. However, if you expect your expenditures to go up due to your goals, such as travel, you will need to replace roughly 100% (or more) of your present income.

Furthermore, this figure does not include your emergency fund or healthcare bills, which are likely to take a significant portion of your retirement income. Your emergency funds should cover at least three months of your living expenses. Your healthcare bills are going to increase as you age, so you should ensure that your retirement savings are sufficient to pay them. Ideally, you should save for a comprehensive savings plan that would cover escalating medical bills in your older years. You should start saving for retirement while bearing in mind increased inflation and consumer prices.

Balanced portfolio management: A well-balanced investment portfolio is another important aspect of retirement preparation. If you want to retire early or even at your official retirement age, you must have a steady source of income during retirement. Your retirement investing portfolio should be diverse and in line with your retirement objectives. Your retirement portfolio should include both high-earning and low-risk/moderate equities. For example, it is critical to include equity-based or other market-linked instruments, such as mutual funds, in your portfolio.

For your retirement planning, you can consider adding a savings plan or money back policy as both of them provide insurance and steady income after a particular time. Insurance coverage helps to ensure the future of your loved ones. Including a savings plan in your retirement portfolio can help you create a solid savings plan for the future. With guaranteed consistent income to supplement your retirement lifestyle, you can get income benefits for up to 45 years or varies with your plan. 

That being said, as you approach retirement age, your portfolio should be changed to reflect your risk tolerance and the life stage you are at. When you are far from retirement, you can take on more risks and include riskier investments in your portfolio. However, as you approach retirement age, your risk tolerance decreases. You would need to modify your investing portfolio to include safer investment possibilities.

Freedom from Debt: One of the most important signals that you are ready to retire is that you are debt-free. Debts are challenging and might jeopardize your financial security in the long run. Furthermore, if you have debt, your retirement may be spent repaying your financial loans. As a result, you should consider retiring only after you have paid off your obligations or have a solid strategy in place to repay your commitments. It is considered to reduce your dependence on credit cards as you get closer to retirement.

Your income and expenses are balanced: You’re doing well if you have no more debt than a year before and have only used a small portion of your savings for spending money. Here is the test: If you can live comfortably on any guaranteed income sources (such as pensions and money back policy return) and less than 4% of your investments after the first year of retirement, you’re doing well. According to studies, following the “4 percent” rule of thumb makes it unlikely that you would ever deplete your retirement assets. To get your safe spending limit for the first year, simply multiply the value of your holdings by 4% (or divide by 25).

You’re thoughtful about how you spend your money: The challenge here is to see what you would do if you suddenly found yourself with more money. For example, what did you do with a tax refund you received in the previous year? You are a wise spender if you first pay off your credit card debt and any outstanding obligations. However, if more cash is immediately spent on luxury, it indicates that you should be more strategic and cautious of your resources.

At last,

Aside from assessing your retirement plan based on the aforementioned considerations, you should also set aside funds to pursue your passion when you retire. While saving for retirement, you would have worked long hours on weekends and during project deadlines to guarantee that you earned a good living and saved enough money for retirement. As a result, retirement is the only time you can pursue your passions and satisfy your truest ambitions. You may travel, scuba dive, write a book, and much more. So, before you retire, make a specific strategy for financing your passion. To ensure your comfort throughout your non-working years, consider the above characteristics to assess your retirement readiness. The only way to retire happily and financially secure is through failproof retirement planning.