RETIREMENT

PLANNING


 What is retirement planning?

Retirement planning is the process of setting
goals for your retirement years and actions
and decisions needed for achieving those
goals.  It includes identifying sources of
income, estimating expenses and cash flows,
implementing a savings program and
managing assets.
 RETIREMENT PLANNING


 Preparing for your finances beforehand is wise and customary.
Achieving a comfortable retirement is a very important event
for majority of people, not only from a financial angle but also
from a social and psychological one.

 “Spend 50% on necessities, 30% on enjoying the present, and save

20% for the future.”
 Why plan for retirement?

 Unfortunately, for most individuals living in
Pakistan, who have not planned for their retirement,
it is a stage of life dominated by:
 Limited income ;
 Difficulty in meeting basic living expenses:
 Dependency on children;
 Healthcare issues with related expenses;
 Sacrifices and hardships; and
 No enjoyment.
 Why plan for retirement?

 For retiring individuals without adequate income during
retirement, living on handouts from family members can be
both challenging and humiliating. In Pakistan, most workers
are not part of a retirement system. Private Citizens mainly
depend on:

 The next generation to support them in their old age;

 Income from property; and

 Interest on bank deposits

 Voluntary Pension System

 To enable employed as well as self-employed
individuals to provide for their retirement in a
regulated environment, the Securities and Exchange
Commission of Pakistan (SECP) introduced the
Voluntary Pension System (VPS) in 2005. The
Voluntary Pension System is regulated by SECP.
 The following should be noted with respect to VPS
schemes:


 A Pakistani national over the age of 18 years (salaried or self-
employed) with a valid Computerized National Identity Card (CNIC)
or National Identity Card for Overseas Pakistanis (NICOP) is eligible
to participate in VPS.
 Under VPS, the employee or the employer (or both) contribute to the
employee's individual pension account (IPA) which is invested for the
long term. Contributions can be in lump sum or at regular frequency.
There is no penalty for missing any payment.
 The pension fund manager opens an individual pension account (IPA)
in the name of the individual, who is referred to as a “Participant”. 
Each individual pension account (IPA) is assigned a unique
identification number (UIN). The funds accumulated are used for
payment of a regular pension or lump sum on retirement. 
 The following should be noted with respect to VPS
schemes:


 To protect pension fund account holders, a VPS separates fund
management and custody of funds through the establishment
of a trust.
 To protect pension fund account holders through
diversification the SECP has specified an investment and
allocation policy for pension funds setting out the broad
parameters for investment of contributions received.
 Individuals can allocate their contributions between equities,
debt, money market instruments and commodities in
accordance with their investment horizon and risk appetite as
reflected in their chosen allocation scheme.
 How to start saving for your retirement?


 Analyze your income and expenses and ensure that you can
spend less than you earn.
 Prepare a budget that includes regular savings, and stick to it.
 To ensure that you do not withdraw money from retirement
savings account for emergencies, separately save money for
emergencies such as unemployment, accidents and medical
expenses. 
 Open an individual pension account (IPA) by visiting your local
asset management company / pension fund manager today. This
is the easiest way to start saving for your retirement. Contact
information can be found at the following link: 
http://mufap.com.pk/members.php
 Building your retirement nest egg


 Always seek financial advice from a trusted financial adviser. Financial
professionals can help you design a savings plan appropriate for your
particular situation.

 Make a habit of saving regularly and try to increase the amount you set aside
each year.

 Always think long term. Do not focus on the short-term performance of your
investments. Instead, stick to your long-term plan and review your portfolio
periodically to stay on track.

 Use a broadly diversified portfolio of stocks and fixed income securities

/bonds. The mix of the amount of stocks versus fixed income securities /bonds
depends, in part on your age, time to retirement and your ability to tolerate
market turbulence or risk.
 Avoid borrowing from your retirement savings for handling short-term
financial problems.
 Types of Retirement Plans

 Spousal IRA
 Fixed Annuities
 Traditional 401(k)
 Roth 401(k)
 403(b) plan
 457(b) plan
 Traditional IRA
 Conclusion

 Retirement planning is an ongoing, lifelong process that
takes years of commitment to build retirement funds needed
for a comfortable retirement.  While it is not possible to
cover all topics in our brief discussion above, it is hoped that
you now have a basic understanding of retirement planning.
 In Pakistan, to enable employed as well as self-employed
individuals to provide for their retirement in a regulated
environment, the Securities and Exchange Commission of
Pakistan (SECP) has introduced the Voluntary Pension
System (VPS). It is important that you benefit from VPS to
build a secure future for your family.