Over the years, people have become better at planning for extreme and sudden occurrences of cash flow disruptions such as unexpected illness, accidental death, or job loss, but, surprisingly enough, they are ill-prepared for more realistic, longer-term eventualities such as retirement. In fact, for most people retirement seems like a distant possibility leading them to grossly misjudge the time needed to financially plan for it.
Any good financial plan starts with identifying a financial goal. Today investment and financial planning have gained wide acceptance among investors as an essential part of their own personal journey. But the path to long-term financial planning is still fraught with more questions than answers. The struggle is with understanding the need for asset allocation and how it relates to individual risk profiles and the time horizon of the investment. This struggle gets amplified when investors only associate long-term planning with investments inequities.
The 4 Stages of Retirement Planning
For a long-term goal such as retirement, each person’s asset allocation - the proportion of their investments each in equity and debt - changes through the investment tenure depending on investors’ age and lifestage. Such asset allocation can broadly be categorized into four stages.
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Esta historia es de la edición July 2021 de Investors India.
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