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Retire Smart: Is Goal-Based Planning the Secret to Your Golden Years?

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Retire Smart: Is Goal-Based Planning the Secret to Your Golden Years?
December 27, 2024

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Retire Smart: Is Goal-Based Planning the Secret to Your Golden Years?

Retirement is often seen as a well-earned chapter of relaxation and fulfilment, where you can pursue hobbies, travel, or simply enjoy precious moments with family. Achieving this dream, however, requires careful planning, especially financial security. For many, the conventional route involves building a large corpus. But a more refined approach, like goal-based planning, could be the game-changer you just need.

Unlike the traditional method of saving indiscriminately, goal-based planning is designed to align your savings with specific priorities. Whether it’s ensuring funds for healthcare, fulfilling a dream to travel the world, or leaving behind a rich legacy, this structured approach provides the clarity and confidence to navigate retirement. But how to make it truly work? Let’s explore.

Rethinking retirement planning

For decades, salaried professionals have taken the straightforward path of accumulating savings without necessarily tying them to a purpose. While this staid approach offers a basic sense of security, it often leaves gaps. For example, a recent survey revealed that retirement savings have stagnated, dropping from 45% in 2022 to 38% in 2023, largely due to inflation and shifting priorities. Worryingly, 43% of women lacked a retirement corpus, compared to 32% in 20221, reflecting significant challenges in long-term planning.

Imagine retiring only to realise your funds fall short for medical emergencies or major life events. You could have a margin of error. But, any gap beyond 5-10% can’t be filled. That’s where goal-based planning steps in to fill the void.

This modern approach ensures your investments are purposeful, targetting specific objectives. For example, a 55-year-old professional may prioritise funding their child’s education and wedding and setting up a steady post-retirement income. Goal-based planning allows for this 3-in-1 focus, allocating resources based on urgency and expected timelines.

Why it matters for those in their 40s and 50s

At this ripe stage of life, time is no longer a luxury. The years leading to retirement are critical, often marked by competing demands—supporting children’s education, repaying loans, and preparing for rising healthcare costs. Without a clear strategy, these challenges can feel overwhelming. In that scenario, not everyone above 60 retires. Census 2011 data shows that for every five persons aged above 60 years, more than two are still working2.

Having targets like Rs 50-lakh or Rs 1-crore retirement corpus are not enough. Goal-based planning provides a solution by offering deeper clarity and focus. It allows individuals to break down their aspirations into manageable steps, ensuring they know exactly what they’re saving for and how to get there. Additionally, this method is flexible enough to adapt to life’s twists and turns, such as unexpected expenses or a change in priorities.

To illustrate how goal-based retirement planning works, consider the example of Mr. and Mrs. Gupta, a couple in their early 50s. Both are salaried professionals with distinct retirement aspirations. Mr. Gupta dreams of a peaceful rural retirement, while Mrs. Gupta wants to travel abroad occasionally and secure funds for their grandchildren’s education.

Goals:

  • Maintain a monthly income of ₹50,000 for post-retirement expenses.
  • Accumulate ₹20 lakhs in 5 years for grandchildren's education.
  • Save ₹10 lakhs for overseas trips over the next decade.

Plan:

The couple evaluated their existing savings, finding a shortfall of ₹30 lakhs. They estimated that increasing investments in targeted plans could bridge the gap.

They invested in an annuity plan to ensure consistent monthly income post-retirement.

They chose a savings-linked insurance policy to simultaneously grow wealth and secure life coverage, addressing the ₹20-lakh educational goal.

They also opted for a flexible guaranteed income plan for travel expenses, which allowed partial withdrawals for milestone events.

When unexpected medical expenses arose, they adjusted their contributions while staying on track for their primary goals. Also, by reviewing their portfolio annually, they ensured their investments aligned with inflation and changing financial needs.

Like the Guptas, you can align investments with specific aspirations, ensuring a secure and fulfilling retirement.

Building a goal-based plan

As you can see from the above example, the essence of goal-based retirement planning lies in defining clear objectives. Start by envisioning what you want your retirement to look like. Whether it’s travelling, maintaining a specific lifestyle, or supporting family milestones, setting these goals is the first step.

Next, evaluate your current financial resources and identify gaps. Tools like retirement calculators can help estimate the amount needed for each goal.

Once you have a clear picture, the focus shifts to choosing the right investment options. Products such as savings-linked insurance plans, annuities, or guaranteed income plans provide the dual benefits of growth and protection.

Establishing realistic timelines is equally important. For example, if your goal is to fund a major event within the next five years, your investment strategy should reflect this urgency.

Lastly, regular reviews ensure that your plan remains aligned with changing circumstances, whether it’s an unexpected expense or a shift in your retirement vision.

Role of life insurance

Life insurance is more than just a safety net; it’s a cornerstone of effective retirement planning. By combining wealth creation with risk protection, insurance products like savings plans and pension schemes can provide both stability and growth.

Consider a scenario where a sudden medical expense arises. Having insurance in place ensures that your retirement corpus remains intact, safeguarding your long-term goals. Moreover, systematic premium payments encourage disciplined savings, helping you stay on track even amid life’s uncertainties.

Overcoming common concerns

Despite its merits, goal-based planning can raise questions. Many wonder if it’s too late to start planning in their 40s or 50s. The good news is that it’s never too late. The focus simply shifts to high-priority goals and selecting investments with accelerated growth potential.

Another concern is adaptability. What if your circumstances change? Goal-based plans are inherently flexible, allowing you to reassess and realign as needed. As for cost, there are a range of products designed to suit different budgets. This goes to show that meaningful planning doesn’t have to break the bank.

Conclusion

Goal-based planning is not just about building wealth—it’s about giving your future a purpose. By focussing on your unique aspirations, this approach ensures that your retirement years are marked by freedom, not financial stress.

Life insurance products, with their dual focus on security and growth, add an extra layer of protection, making them an invaluable component of any retirement plan.

Retirement should be a time to thrive, not merely survive. With a goal-based approach, you can transform your dreams into actionable plans. This is will ensure a life where financial worries fade into the background. So why wait? Start today and step into your golden years with confidence and clarity.

Source

1. https://retirement.outlookindia.com/plan/news/retirement-savings-of-indians-drop-significantly-in-2023-womens-participation-sees-a-sharp-decline-survey

2. https://www.hdfclife.com/insurance-knowledge-centre/retirement-planning/how-india-retires

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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Retire Smart: Is Goal-Based Planning the Secret to Your Golden Years?

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