Steps to Prepare Retirement Fund – Retiring and living your old age in peace without thinking about finances is everyone's dream. We are aware that we will not live and work forever. As age begins to grow, productivity at work begins to decrease.
Therefore, it is very important for us to prepare a pension fund as early as possible. The goal is that we can be financially independent in old age.
Setting up a retirement fund doesn't have to cost a lot of money, start setting aside some of our current income. The important thing is consistency.
let you not confused, Whiz has prepared 10 steps to prepare a pension fund. Listen, come on!
Also Read: Types of Financial Statements You Need to Know
10 Steps to Setting Up a Retirement Fund
1. Deciding When to Retire
Before setting up a retirement fund, determine when you will retire. At what age will you retire? That way, you can set a strategy for preparing retirement funds.
For example, you are currently 28 years old and you want to retire at 55. You have 27 years to collect your retirement fund.
2. Calculating Retirement Needs
The mandatory thing that you have to do when preparing a retirement fund is to calculate your needs when you retire later. Do the calculations starting from the cost of food, water, electricity, insurance and so on.
Future needs are difficult to predict, but usually do not differ much from current needs. In fact, there are needs that we no longer need, such as transportation to the office.
3. Start and Keep Saving
If you already have a plan when will you retire. Start saving. You can set aside some of your salary to make your own retirement savings. It doesn't have to be a large amount, start with a small amount then try to increase the amount.
Make retirement savings a priority and be consistent in saving. Also, never touch your retirement savings.
If you need money, try to reduce other fund items. If you withdraw your retirement fund, you will lose the principal and interest on your savings.
4. Pay Off All Debts
Debt is one proof that our financial situation is not healthy. It is rare to find people who live without debt, ranging from credit card debt, installments, to borrowing money from neighbors and relatives. Whatever the form, debt is like a part of the modern lifestyle.
In fact, if it cannot be controlled, debt will burden us in the future, especially debt with high interest rates.
When setting up a retirement fund, try to pay off all the debts you have. If you have to take a loan or debt, choose a positive debt. Debt that can be used to generate other income, such as buying a motorbike to become an online motorcycle taxi in your spare time, buying a camera to become a photographer, and so on.
The important thing that must be instilled is that you don't retire while you still have debt.
5. Find out about Social Security
One source of pension funds is through social security. Based on BPJS of Employment, pension insurance is a social security that aims to maintain a decent standard of living for participants and/or their heirs by providing income after the participant enters retirement age, experiences permanent total disability, or dies.
In Indonesia, the source of pension funds is based on BPJS Employment in the form of Old Age Security (JHT) and Pension Guarantee (JP). Learn and find out about the social security. Social security is one of your sources of income in old age.
6. Choose the Right Financial Products
When you are ready to start preparing for a retirement fund, you should also consider financial products that are suitable for saving your retirement funds and achieving the targets you have set.
You can save your retirement funds in the form of savings, time deposits, or mutual funds. Think carefully and learn all the advantages and disadvantages.
7. Have an Emergency Fund and Insurance
In addition to having a pension fund, you must also have an emergency fund and insurance. An emergency fund is a fund set up for the unexpected.
If you have an emergency fund, you don't have to worry about unexpected events, such as when you have to stop working, there is a financial crisis, and so on. You can use these funds without reducing your pension fund.
Likewise with insurance funds. These funds will be very useful until you are old.
8. Not Relying on Pension Funds from the Office
Usually, retirement funds from the office are not much and will not meet your needs in old age. Therefore, do not rely on pension funds from the office.
Make your own retirement savings and use it to find passive income by buying active assets, such as property, business, securities, and so on.
9. Start Investing and Search Passive Income
There's nothing wrong with learning about investing as early as possible. Investment can be one passive income in your old age. If you are curious about passive income You can read the full article here!.
When you want to invest, study well all the risks. Invest according to your financial ability. The choice of investment type can be adjusted to the retirement fund you want.
10. Manage and Control Finance
Recording financial transactions is very important. Record every income and expense that you use each month. Managing and controlling finances will be very useful in preparing a retirement fund.
If you can manage finances, you will easily allocate needs and items from your income. You can also consider the amount of money that goes into retirement funds. In addition, if your finances are controlled, your financial health will be stable.
Also Read: The Importance of Preparing Family Insurance
There is no such thing as too soon in setting up a pension fund, in fact a pension fund must be prepared as early as possible. Follow the steps above when you prepare your retirement fund.
In addition, use the Whiz Financial App. to manage finances. You don't need to bother recording financial transactions anymore, every transaction you make will be automatically recorded in the Whiz application. Curious what other features are in Whiz?
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