Retirement Planning: Meaning, Importance, Process, Rules and Benefits 1

Retirement Planning: Meaning, Importance, Process, Rules and Benefits

Retirement Planning: Meaning, Importance, Process, Rules and Benefits

In last few decades everyone is getting awareness and concerned about retirement planning. In past it was never a big concern due to low rates of inflation and less technological advancements. So in this comprehensive article, we would like to cover all the important factors around the retirement planning, so that you can enjoy your retired life well.

What is retirement?

Retirement is a life event that marks the end of a person’s working career and the start of a new phase in life. It is a time of transition, change, and opportunity after long years of service or employment. If planned properly it gives wonderful opportunity to pursue hobbies, travel, spend time with loved ones, or just relax and enjoy life. However if not planned properly, it can also be a time of financial uncertainty and stress to maintain the lifestyle and run the family expenses and meeting other financial needs.

What is retirement planning?

As we gone through the retirement event, Retirement planning is an important process of anticipating, calculating and preparing for retirement, by setting financial goals, developing a saving and investment strategy, managing debt and expenses, assessing insurance and healthcare needs, and planning for meeting other financial needs, so that rest of the life of the individual and dependents can be enjoyable and happy and they can maintain their standard of living, and enjoy a comfortable retirement. Retirement planning also provides a sense of control, confidence, and peace of mind, by anticipating and addressing potential risks and contingencies.

Why Is Retirement Planning So Important?

Retirement planning is the process of preparing for the financial needs and lifestyle changes that come with retirement. It is a critical component of financial planning that should begin as early as possible, preferably in one’s 20s or 30s. Unfortunately, many people put off retirement planning until later in life, which can result in significant financial difficulties down the road.

  1.  The first reason why retirement planning is so important is that people are living longer than ever before. With advances in healthcare and medical technology, it is now common for people to live well into their 80s and 90s. This means that retirees will need to have enough savings to support themselves for 20-30 years or more. Without proper planning, retirees risk running out of money and becoming reliant on government assistance or family support.
  2. Retirement planning is also important because it allows people to maintain their standard of living after they stop working. Many people mistakenly assume that their expenses will decrease significantly in retirement, but this is not always the case. While some expenses, such as commuting costs, may go down, others, such as healthcare expenses, may increase. Additionally, retirees may want to travel, pursue hobbies, or engage in other activities that require additional funds.
  3. The third reason why retirement planning is important is that it provides a sense of security and peace of mind. Knowing that you have enough savings to support yourself in retirement can alleviate financial stress and allow you to enjoy your golden years without worrying about money. It can also help you avoid making hasty financial decisions or taking unnecessary risks with your investments.

Seeing the above reasons we can easily anticipate how important retirement planning is. It is a crucial aspect of financial planning that should not be overlooked. It allows people to prepare for the financial realities of retirement, maintain their standard of living, and enjoy their retirement years with peace of mind. Whether you are just starting your career or are approaching retirement age, it is never too late to begin planning for your future.

How Do I Start Planning for Retirement? What is the process of retirement planning? What are the 7 steps in planning your retirement?

Starting to plan for retirement can be overwhelming, but it is an essential step in securing your financial future. Here are some steps to get started:

  1. Set retirement goals: The first step in retirement planning is to determine how much money you will need in retirement. Consider your lifestyle goals, including travel plans, hobbies, and other activities you would like to pursue. Also, take into account healthcare costs and potential long-term care expenses.
  2. Assess your current financial situation: Take a close look at your current income, expenses, assets, and debts. This will help you determine how much you can save for retirement and where you need to make adjustments to your spending and savings habits.
  3. Estimate your retirement income: Consider the various sources of retirement income, such as Social Security, pensions, and retirement accounts, and estimate how much you can expect to receive from each source.
  4. Develop a retirement savings plan: Determine how much you need to save each month to reach your retirement goals. This will depend on your age, retirement goals, and current savings.
  5. Maximize retirement accounts: Take advantage of tax-advantaged retirement accounts, such as 401(k) plans or IRAs in US and NPS schemes in India, to maximize your retirement savings potential.
  6. Consider other investments: Look into other investment options, such as stocks, bonds, or real estate, to diversify your retirement portfolio and potentially increase your savings.
  7. Monitor and adjust your plan: Review your retirement plan regularly and adjust as necessary based on changes in your financial situation or retirement goals.

It’s essential to start planning for retirement as early as possible, but it’s never too late to start. By taking these steps, you can begin building a solid foundation for your retirement savings and achieve your retirement goals. Additionally, consider consulting with a financial advisor to help guide you through the retirement planning process and ensure that your plan is on track.

What is the 4% rule in retirement planning?

The “4% rule” is a widely used guideline for retirement planning that suggests that you can safely withdraw 4% of your retirement savings in the first year of retirement and adjust that amount for inflation each year thereafter. The idea behind this rule is that by withdrawing 4% annually, your retirement savings should last for 30 years or more, assuming a mix of stocks and bonds.

For example, if you have a retirement portfolio of $1 million, you would withdraw $40,000 in the first year of retirement. In subsequent years, you would adjust that amount for inflation. The 4% rule is based on historical market returns, and it assumes that your retirement savings are invested in a diversified portfolio that includes stocks and bonds.

It’s important to note that the 4% rule is just a guideline, and it may not be appropriate for everyone. Your personal circumstances, such as your retirement goals, lifestyle, and risk tolerance, may require a different withdrawal rate. It’s also important to regularly review your retirement plan and adjust your strategy as needed to ensure that you’re on track to meet your goals.

What is the 30 30 rule to retirement?

The 30/30 rule is a retirement planning guideline that suggests that you’ll need to have saved 30 times your annual expenses to retire comfortably. The idea behind this rule is that if you have saved 30 times your annual expenses, you can withdraw 3.3% of your retirement savings annually and have a high likelihood of your savings lasting for 30 years or more.

For example, if your annual expenses in retirement are $50,000, you would need to have saved $1.5 million (30 x $50,000) to meet the 30/30 rule. If you follow this guideline, you would withdraw $49,500 (3.3% of $1.5 million) in the first year of retirement and adjust that amount for inflation each year thereafter.

It’s important to note that the 30/30 rule is just a guideline, and your actual retirement needs may vary depending on your individual circumstances. Your lifestyle, healthcare needs, and other factors may require you to save more or less than 30 times your annual expenses. The key is to start saving as early as possible and regularly review your retirement plan to ensure that you’re on track to meet your goals.

Benefits of retirement planning

After learning the various components of retirement planning and its importance, let’s compile the several benefits of retirement planning:

  1. Financial security: Retirement planning helps you build a nest egg to support your retirement lifestyle and meet your financial needs. It can help you achieve financial security and peace of mind in retirement.
  2. Flexibility: By planning for retirement, you have more control over your financial future. You can make informed decisions about how much to save, when to retire, and how to manage your retirement income.
  3. Tax benefits: Retirement accounts such as 401(k)s and IRAs offer tax benefits, such as tax-deferred growth and tax-free withdrawals in retirement. This can help you save more for retirement and reduce your tax burden.
  4. Compound interest: Starting to save early and regularly can help your retirement savings grow through the power of compound interest. This means that you earn interest on both your principal and the interest you’ve already earned.
  5. Peace of mind: Knowing that you have a plan in place for your retirement can give you peace of mind and reduce financial stress. This can help you enjoy your retirement years without worrying about money.

In summary, retirement planning can provide financial security, flexibility, tax benefits, compound interest, and peace of mind. By taking the time to plan for your retirement, you can enjoy a comfortable and financially secure retirement.

Retirement planning calculator

A retirement planning calculator is a tool that can help you estimate how much you need to save for retirement based on your current financial situation, retirement goals, and other factors. Retirement calculators can also help you determine how much income you’ll need in retirement, how much you should save each year, and how long your retirement savings will last.

There are several retirement planning calculators available online, including those provided by financial institutions as goldstone financial group retirement planning, retirement planning websites, and personal finance websites.

When using a retirement planning calculator, it’s important to input accurate information and to consider various scenarios and factors that may impact your retirement savings. It’s also important to regularly review and adjust your retirement plan based on your changing circumstances and goals.


Retirement planning is a critical component of financial planning that should not be overlooked. By setting clear goals, assessing your financial situation, maximizing retirement accounts, and considering other investment options, you can build a solid foundation for your retirement savings. Regularly monitoring and adjusting your plan can help you stay on track and ensure that you are well-prepared for the financial realities of retirement. Whether you are just starting your career or approaching retirement age, taking action now to plan for your future can help you achieve a comfortable and secure retirement.

We hope this article will be helpful in planning a happy retired financial life.

What is National Pension Scheme (NPS), Benefits of NPS, Eligibility, NPS Calculator, Disadvantages & NPS Tax Benefits 1

What is National Pension System (NPS), Benefits of NPS, Eligibility, NPS Calculator, Disadvantages & NPS Tax Benefits

What is National pension Scheme (NPS)

The National Pension Scheme (NPS) is a government-sponsored retirement savings program in India. It was launched way back in 2004 with the aim of providing retirement income to all citizens of India encouraging the social security provisions. It is a must part of everyone’s retirement planning.

National Pension System (NPS) is a voluntary, defined contribution retirement savings scheme designed to enable the subscribers to make optimum decisions regarding their future through systematic savings during their working life. NPS seeks to inculcate the habit of saving for retirement amongst the citizens. It is an attempt towards finding a sustainable solution to the problem of providing adequate retirement income to every citizen of India.

Under NPS, individual savings are put in to a pension fund which are invested by PFRDA regulated professional fund managers as per the approved investment guidelines in to the diversified portfolios comprising of Government Bonds, Bills, Corporate Debentures and Shares. These contributions would grow and accumulate over the years, depending on the returns earned on the investment made.​

At the time of normal exit from NPS, the subscribers may use the accumulated pension wealth under the scheme to purchase a life annuity from a PFRDA empanelled Life Insurance Company apart from withdrawing a part of the accumulated pension wealth as lump-sum, if they choose so.

Benefits of National Pension Scheme (NPS) of NPS

  • Flexible- NPS offers a range of investment options and choice of Pension Funds (PFs) for planning the growth of the investments in a reasonable manner and monitor the growth of the pension corpus. Subscribers can switch over from one investment option to another or from one fund manager to another.
  • Simple – Opening an account with NPS provides a Permanent Retirement Account Number (PRAN), which is a unique number and it remains with the subscriber throughout his lifetime. The scheme is structured into two tiers:

o    Tier-I account: This is the non-withdrawable permanent retirement account into which the regular contributions made by the subscriber are credited and invested as per the portfolio/fund manager chosen of the subscriber.

o    Tier-II account: This is a voluntary withdrawable account which is allowed only when there is an active Tier I account in the name of the subscriber. The withdrawals are permitted from this account as per the needs of the subscriber as and when required.

  • Portable-NPS provides seamless portability across jobs and across locations. It would provide hassle-free arrangement for the individual subscribers while he/she shifts to the new job/location, without leaving behind the corpus build, as happens in many pension schemes in India.
  • Well Regulated-NPS is regulated by PFRDA, with transparent investment norms, regular monitoring and performance review of fund managers by NPS Trust. The account maintenance costs under NPS are the lowest as compared to similar pension products across the globe. While saving for a long-term goal such as retirement, the cost matters a lot as the charges can shave off a significant amount from the corpus over 35-40 years of investment period.
  • Dual benefit of Low Cost and Power of compounding:Till the retirement, pension wealth accumulation grows over the period of time with a compounding effect. The account maintenance charges being low, the benefit of accumulated pension wealth to the subscriber eventually become large.
  • Ease of Access:The NPS account is manageable online. An NPS account can be opened through the eNPS portal. Further contributions can be also be made online through the following eNPS portals of CRAs:  NSDL CRA, Kfintech CRA, CAMS CRA. Central Recordkeeping Agency (CRA) is required to establish an internal system that delivers compliance with standards for internal organization and operational conduct, with the aim of protecting the interests of NPS subscribers and their assets.

Eligibility for opening NPS account

  • All Citizen Model
  • A citizen of India, whether resident or non-resident, subject to the following conditions:
  • Applicant should be between 18 – 60 years of age as on the date of submission of his/her application to the Point of Presence (POP)/ POP Service Providers (POP-SP).
  • Applicant should comply with the Know Your Customer (KYC) norms as detailed in the Subscriber Registration Form. All the documents required for KYC compliance need to be mandatorily submitted

What is NPS Calculator? 

The National Pension Scheme Calculator helps an investor estimate the wealth gained and maturity amount of the whole investment, i.e., how much they will receive as a pension when they retire at age 60 and the monthly pension.

Features of NPS Calculator

Here are some of the salient features of the National Pension Scheme Calculator.

  • NPS calculator can be used online in a very easy and simple way.
  • NPS plan calculator helps calculate the amount of pension you will receive.
  • NPS calculator also shows the amount invested by you during the accumulation phase, NPS interest rates, returns earned, and the total amount of funds generated at maturity.
  • The NPS calculator makes the computation of maturity amount simpler.
  •   The investors of NPS scheme can check the tax exemptions available under Section 80Cof the IT Act, 1961.

Disadvantages or Cons of the NPS

The NPS scheme has its own set of cons or disadvantages when we compare it to the other investment/pension options available.

  1.  Withdrawal Limits

Along with the NPS lock-in period, withdrawals from the pension account also have restrictions. NPS restricts all kinds of withdrawals before the subscriber reaches the age of 60 years. The subscriber can make the first withdrawal from NPS after 10 years of opening the account, and a total of 3 withdrawals, till they reach the age of 60 years. The withdrawal cannot be more than the total sum of all the contributions made by the subscriber.

  1. Taxation at the Time of Withdrawal

The NPS corpus, which the subscriber can use for buying an annuity or for drawing pensions, is taxable when the schemes mature. 60% of the investment in the NPS is taxed by the Government of India, while 40% escapes taxation.

  1. Account Opening Restrictions

A person can maintain a single NPS account through an NPS CRA login in their lifetime. While the PRAN can be easily ported across geography and jobs, 1 single individual will get a single PRAN.

  1. Limited Exposure to Equities

The investment limit on equities has been confined to 75%. This may be a significant issue for individuals in their 20’s-30’s. This implies a possible loss of opportunity to get exposure to the equity markets.

  1. Mandatory Annuity

The withdrawal from Tier 1 account is restricted as it is the primary account for pension savings. At the time of maturity, one can withdraw 60% of the funds, and the remaining are used to buy an annuity. The returns of annuity are not tax exempted.

  1.   NPS Lock-in Period

Since NPS is a retirement product, the NPS lock-in period is till retirement.

  1. Complexity towards Choosing the Best NPS Fund Manager

Many people are not aware of the financial terms relating to equities, debt, securities, and others. Hence, they fail to choose the best NPS fund manager for their NPS investments.

Factors Impacting Monthly NPS Pension Amount

Traditional pension schemes such as Government pension or EPS pension had pre-defined contribution amounts and a specific formula to calculate the monthly pension post-retirement. The monthly pension from National Pension System is different because the amount accumulated in the pension account varies from one subscriber to another due to some key reasons:

  • NPS Contributions

You can choose the amount you want to invest in your NPS account subject to a minimum annual contribution of Rs. 500. There is no maximum limit on the amount that you can invest, so, you have the opportunity to accumulate a significantly larger amount by the time you retire as compared to traditional pension schemes where there is a maximum limit on the pension contribution that can be made. As a result, your monthly pension from NPS can be significantly higher as compared to the monthly pension received from traditional pension schemes.

  • Age & service left at the time of Entry

The returns will depend on the factor when one starts investment and how long one is invested into the NPS.

  • Returns earned from NPS

The Returns from NPS will depend on the asset classes you are invested in. Under NPS, your contributions are invested in 4 different asset classes – Equity, Government Securities, Corporate Bonds, and Alternative Investment Funds. What’s more, you can also select the allocation limits towards each asset class according to your risk tolerance.

Income Tax Benefits available in NPS

  1. Benefits To Individuals:
    Any individual who is Subscriber of NPS can claim tax benefit under Sec 80 CCD (1) with in the overall ceiling of Rs. 1.5 lac under Sec 80 CCE.

Exclusive Tax Benefit to all NPS Subscribers u/s 80CCD (1B)
An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of Income Tax Act. 1961.

  1. Benefits under the Corporate Sector:

Corporate Subscriber:
Additional Tax Benefit is available to Subscribers under Corporate Sector, u/s 80CCD (2) of Income Tax Act. Employer’s NPS contribution (for the benefit of employee) up to 10% of salary (Basic + DA), is deductible from taxable income, up-to 7.5 Lakh.

Employer’s Contribution towards NPS up to 10% of salary (Basic + DA) can be deducted as ‘Business Expense’ from their Profit & Loss Account.

For more details visit the official site nps login