Retirement Planning for Newly Employed Youth

Abstract

When you are young, it is really very challenging to think about retirement planning. Young people are busy starting careers, families, or settling in new locations, so it is understandable that they have the unwillingness to discuss retirement planning this early in life. However, life goes by so fast. Every year you waste postponing retirement planning means adding a year depriving yourself of retiring early and enjoying the golden years. Thus, this paper helps you as a young individual to start this conversation about your future.

Introduction

One of your goals in life should be retiring with financial freedom and security through a financially comfortable and stress-free lifestyle. Retirement planning is the crucial task for this goal, as it decides how you will live once you are old and no longer wish or are unable to work. There are various factors which affects the retirement planning like at what age you want to get retire, how much amount you will need to meet your living expenses and what will be the source of money then. Generally speaking, retirement planning is planning your finances for the period of life after you stop working. One standard plan cannot fit everyone because each person has his/her own unique situations.

What is needed for retirement planning?

Here is a list of information needed for retirement planning:

• Various investment options available to us.
• Rates of return on Investments .
• Your annual income and retirement income.
• Age and length of service to retire.

What are the most common retirement plans available ?

There are many Retirement plans which will be available throughout your employment tenure like individual Plans , employer-sponsored plans for self employed and small business owner plans . Each and every plan has its own pros and cons so it is very important for you to take time to understand what your company is offering to you or to discuss your investment with your bank or a financial planner.

How to write your own retirement planning guide?

Because each person is unique, no two people have same needs. Thus, it is very important for you to design your own retirement planning guide .

Your plan needs to include these crucial and basic elements.

Do you know what you want to do after retirement? Will you be starting a new career? Will you work from home? Will you be traveling ? You may even postpone retirement for as long as you can. Think about which lifestyle you would like to pursue after retirement.

Did you forecast a budget for your golden years? Is it based on your current standard? What is the minimum you will need to sustain to be comfortable in your golden years?

Do you enjoy good health? Do you expect chronic medical problems as you get older? Do you have a contingency plan if you need to retire early? Will you have or be able to get medical insurance?What will be the primary source of your income? Do you have a pension? Do you have an employer-sponsored retirement plan, if yes, when will you reach eligibility? Will you qualify for social security benefits? Do you have personal saving, investments, or emergency funds ?

Will you be free of all consumer debts? What about your mortgage or loans?

Do you have your legal status in check? How do you ensure your wishes will be respected if anything happens to you? If not, you will need to create your legal documents, such as a will, trust, power of attorney, living will, medical directive, general or specific power of attorney, estate executor, or guardian (as needed).

Do you have your beneficiaries updated on all your documents? Do you plan to provide for family members after you are gone? Do you need to invest in life insurance?

How to avoid common and costly mistakes in retirement planning?

Again, it is extremely difficult for young people to think of retirement planning at such an early age. But, most retirees state that not saving and investing early is the most regretted, common, and costly mistake they made in their retirement planning.

To help you avoid other common and costly mistakes, we have prepared a list of do’s and don'ts.

Do's:

• Start planning your retirement from first job.
• Contribute the maximum possible to savings.
• Invest in tax free plans.
• Diversify and allocate your funds wisely.
• Create your own timeline for receiving benefit at retirement age.

Don'ts

• Saving is not urgent.
• Ignore the impact of taxation .
• Investing in one project.
• You can get benefits whenever required without planning.

Literature reviews

Shailesh Thakur, Dr. S. C Jain, Dr. Rameshwar Soni In their research paper has examined the perception of individual towards retirement planning.In order to get the benefits in the later life one has to start investing early in Retirement planning because it is the most important aspect of a normal life cycle which is related to the family income . The individual with a proper retirement planning possess more wealth in comparison to the one who doesnot. But still most of the individual doesnot give importance to the retirement planning.Generally the young employed found themselves too young for retirement planning and hence doesnot have any enthusiasm and positivity towards it. Therefore the need to assess the perception towards of young/individual towards retirement planning arises.While analyzing the responses of 1144 respondents through the questionnaire, the majority of the respondents of different age groups want to get retire in next 20 years and more. There were 638 respondents who were not sure about their retirement . Out of which 33 were even didn’t know about it.132 respondents were considering themselves too young to plan a retirement while 319 didn’t have sufficient fund and rest need guidance.

The majority has internet / advertisement or Invested myself as the source of information for the retirement advices. Majority were investing only 10-20 percent of their income towards retirement objectives.But still after so many variances in age ,occupation, income , majority of respondents found positive towards retirement planning.

Sobesh Kumar Aggarwal, Samir k Barua, Joshey Jacob, Jayanth R Varma has studied about the dimensions of the financial literacy among the young working population in urban India. When nowadays individual are self responsible for managing their own finances and securing their financial future the increase in the financial product range creating more complexities for individuals and hence individual fails to invest wisely so it's high time to exposing young people to financial concept to improve financial decision making skills of youth. As in the paper focus is on the youth ; the study is also done about the same . The main dimensions of study which is collected are gender, age, level of education, marital status, family income, financial decisions making process and budgeting of Expenditure . To examine the literacy level various score board are settled and result define some other reality a s only 24% of the respondents attain Higher financial literacy score but those who don't attain a good score have a very positive attitude towards financial education as they have a very small consumption level and very much to save but not aware about the right way to invest wisely . financial literacy among Young India is lack due to absence of input required to financial literacy in general education process. This can easily corrected by focusing on the basic at college and school level or due to some other educational programs.

Robert L. Clark, Madeleine B.d'Ambrosio, Am A.McDermed, Kshama sawant in their study had focused on need to improve the standards of financial literacy among individuals. According to a research the individuals have limited knowledge of financial markets ,level of risk and how much they need to save to achieve their retirement goals. Because of lack of knowledge workers start saving too lit in their life. Hence they did not get an optimal balance between current expenses while working and future expenses in retirement. Recognizing the lake of financial knowledge some employer now have started providing financial education program to their employees. This financial education provided can decrease retirement savings complexity . The information related to financial terms plays a crucial role in an individual life. In the paper to settle the economic life cycle models to set retiring goals make various assumptions and tried to find out that whether financial education influence retirement savings or Not for which they organized a seminar which was open to all .The seminar aimed at audience in different life stages life stages including newly hired employees. mid career workers and pre retired people. After conducting seminar they found that individual solve the retirement related problem with given current information; if new information is received the retirement goals based on prior Optimization will change. The respondents indicate that they were likely to change their retirement goals and saving behaviors according to the change in information it shows that many people not have an adequate knowledge or understanding of financial planning .In order to make optimal return retirement plans and appropriate level of financial knowledge and understanding is necessary.

H. Jude Boudreaux CFP is the founder of upperline financial planning has suggested the main 5 element in his article to balance life after retirement. The first step according to his experience is to understand the flow of cash from your household. The second is to make your choice clearer and next is to limit your extra luxurious life. The fourth one is to save for present and future goals and the last but not the least is to have a spontaneous plan.

The article published on may 27, 2016 at human interest focus on how we can convince young employees to save for retirement for which there is a simple alphabetical solution has given. There is the suggestion that time is money and this time can be utilized efficiently only through a budget and avail all the benefits comes with the retirement plans to live a standarizes life after retirement.

The article published in financial express on January 2 ,2017 by Navneet Dubey suggested the simplest way to become rich is to follow the rules of financial planning. This is true for young employees also as the early you start saving for your future needs, the better it will be for you.

It’s good to keep credit cards until the time you are paying the dues on time, but once you start exceeding your credit limits, you may fall short of money in future.

Here are those five things which one should do in financial planning.

1. Don’t pay hefty bills on credit cards
2. Retirement planning
3. Do proper tax planning
4. Prepare a budget
5. Emergency Fund.

Research methodology

To study the perception of newly employed youth towards their retirement a survey was conducted among the concerned group of people. The data was collected through questionnaire and respondents were selected without any biasness

The questions were related to know the perception of youth towards their retirement planning. The following questions were asked to analyze.

The above chart shows that the majority of respondents believe that financial education has an influence in retirement planning.

What would you like to do the most after retirement if you could live forever?

The study shows how the newly employed youth is interested in learning new skills throughoit their life if they could live forever.

What would you look forward to doing the most during your retirement years?

This study shows that the newly employed youth want to enjoy their retirement years but at the same time those who want to work during retirement years are also not legging behind.

The survey shows that today youth is spending their free time mostly in hangouts while a sincere percentage like to involved in sports. While Watching television is the least chosen option.

The study shows that the majority of respondents want regular vacation to be a part of their plan.

In the survey it is found that majority of newly employed youth want to start their own business after their retirement.

The study shows that the majority of respondents need more than 20,00,000 to fulfill their after retirement goals.

According to the study approx 58 percent of the respondents feels that to meet their need after retirement they required to save quarter of their salay.

The study shows that despite of believing that financial education influence retirement still a majority of respondents want to fund their retirement by investing in property and least interested in availing various options available in the form of social security or stock option , by considering pension as more preferably.

Conclusion

From the above study it can be concluded that there is no single way to prepare a best plan for retirement planning . One should adopt a plan on the basis of their life style, needs, budget and income. So they can afford a healthy and wealthy living standards when they get retired and didn't have a fixed employment. It is also found that despite of believing that financial education influence their retirement planning, they are not trying the same in practically as majority of respondents found property investment sutaible for their retirement planning