40 is an important stage for retirement savings. This is a stage of age where there is less scope to correct mistakes. The reason is that there is less time on hand for this.
Amitesh is 42 years old. He is a professor at the university. A few years ago he went to Andaman with the family. He often sees pictures of this trip. On seeing them, Amitesh becomes very happy. After his retirement, he wants to take such more memorable trips. Formerly a professor and now a technology consultant, his wife and he have been saving together since their marriage in 2000. Husband and wife have been taking out a part of their earnings every month for this. As the salary increases, they continue to increase it from time to time. To repay his home loan, he recently had to make some adjustments to his contract. They want to be completely debt free in the next five years. For this, they are taking strictly financial decisions.
40 is an important stage for retirement savings. By this time a person has reached the top of his career or is close to it. His salary is also permanent and well. If no one thinks about retirement savings even at this time, then he is really making a big deal with his long-term goal. By this stage, Amitesh and his ilk should have a clear strategy for their retirement plans. The reason is that saving for this goal cannot be done with a haphazard attitude.
However, higher interest on personal loan and credit card debt can prevent Amitesh from saving. The savings can be cleared by returning the borrowings. You may have to withdraw money from this investment. Amitesh and his wife have made a right by taking the decision to repay the loan as soon as possible. However, both personal loans or credit cards such as unsecured and secured loans like home loans should eliminate the first unsecured loan. The reason for this is that their interest cost is high and no tax benefit is available.
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This is a stage of age where there is less scope to correct mistakes. The reason is that there is less time on hand for this. Savings for goals like retirement need to start much earlier. For this, capital increase and compounding is required.
should evaluate their portfolio. They should tilt their portfolio more from equity to growth assets. He and his family should focus on saving by reducing lifestyle expenses. Such expenses may include buying expensive laptops or expensive cars. Along with creating an emergency fund for the protection of income, life insurance and mediclaim policy is also needed. Due to not having an emergency back-up, Amitesh’s family may have to face serious consequences if he does not live in any untoward incident.
At this stage of age, Amitesh should focus on increasing earnings and savings more and more. In this way, where the ratio of their savings should increase, the ratio of debt should increase.
Contents of this page courtesy the Center for Investment Education and Learning (CIEL). Contribution of Girija Gadre, Aarti Bhargava and Labdi Mehta.
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