IN THIS POST
- Investing in a plot or a plot file
- Buying real estate for rental income
- Buying a commercial property
- Purchasing term life insurance
- Opening a savings account
It’s never too early to start financial planning for retirement. Unfortunately, a lot of self-employed and salaried folks only start worrying about their retirement plans after they enter their 50s, which leaves them with just a few years to both formulate and execute a plan. With 60 years being the retirement age in Pakistan, one can easily assume that most people have to give up working without being able to set up a suitable safety net to fall back on.
Truth be told, the prospect of setting up a retirement plan can be a little overwhelming. However, if you want to spend your golden years without having to rely on your kids for financial assistance, worrying about healthcare expenses, making sacrifices and compromising on things that bring you joy, it’s imperative that you start thinking about your future as early as possible.
How to Start Your Own Retirement Plan
Here are some of the proven ways that can help you boost your retirement income.
Investing in a Plot or a Plot File
Real estate investment is undoubtedly one of the best ways to set up a retirement plan.
If you are a real estate entrant, you first need to familiarize yourself with some common property terms used in Pakistan so that you would know what words like fard and inteqal mean in the industry lingo. Secondly, you need to understand the basics of real estate investment in Pakistan so that you can utilize your funds for maximum gains.
When it comes to purchasing a parcel of land, you have two main options to choose from, depending on your budget: buying a plot file and/or buying a plot.
A plot file is essentially a document that is issued by housing societies before they are developed. These files are relatively cheaper and are considered a popular investment option among long-term real estate investors in Pakistan. Once the plot is allocated and the possession is announced, the rates of the files linked with developed plots rise significantly. However, if you are working on your retirement plan, you need to do your homework and thoroughly look into the residential scheme before making any investments.
The other option, of course, is buying a plot and then re-selling it for a higher price. It is one of the most profitable property investment activities as investors buy plots in under-development projects and hold onto them until the area is fully developed and the prices increase.
Buying Real Estate for Rental Income
A lot of people prefer investing in real estate for retirement income. If you own more than one residential property, you can start preparing for retirement by putting up one of them for rent to generate a regular stream of income. In case you don’t own a house, apartment or commercial property, you need to start saving up for one.
Rental properties are a lucrative real estate investment option to start a retirement plan. Owning a rental property in retirement is extremely profitable as you will get a constant return on the money you’ve spent on it while maintaining ownership.
Generally, people prefer buying a house or an apartment and then leasing it out. Even if you own a commercial property, you can rent it out to a small business for a steady monthly income that would ideally cover your mortgage, taxes, insurance and maintenance.
Of course, maintaining a rental property can be a bit of a hassle, but as long as you properly screen the tenants and protect your rights by preparing an agreement, it will all be fine.
For a detailed discussion on the topic, you can take a look at our comprehensive guide on how to rent out your house. You can also read our tips on renting out commercial property in Pakistan for further clarification.
Buying Commercial Property to Run a Business
Does renting out your commercial property sound like too much of a hassle? Well, then you should think about utilizing it yourself.
If you have some experience running a business or have the spirit of entrepreneurship, you can always use your commercial property to run your own business. Some of the most affordable (and least complex) options are converting your space into a general store, bakery or grocery shop. If you want to go a little bigger, you can use your space to run a coaching centre, boutique, salon, fitness centre, café or restaurant. Needless to say, the type of business you opt for will also depend on the location of your property as well as your capital. However, it’s a really brilliant way to make sure your retirement plan is a success in the long run.
Not to mention, you can always hire someone to look after your business if you can’t do it yourself full-time. Having a business of your own will also keep you busy along with providing an income, helping you lead a purposeful life after retirement.
Please note that investing in real estate during inflation could be a wise decision since home values usually keep up with the rising prices even in times of economic uncertainty.
Purchasing Term Life Insurance
Generally, people think that buying life insurance for themselves would only benefit their kids (or whoever they have listed as their beneficiaries) following their death. That’s simply not the case because there are more than one types of life insurance plan available in Pakistan that you can opt for while setting up your retirement plan.
Buying term life insurance is one of the most practical retirement investment plans, granted you buy it at an early age. Putting it simply, this particular type of life insurance is an agreement between the policyholder and the insurance company, where the latter promises to pay an agreed-upon sum to the former after a certain period of time once the policy has matured. In exchange, the policyholder makes monthly or yearly payments to the company, which is known as a premium. This makes it a really smart way to save up money for your old age.
Furthermore, life insurance companies also provide coverage for accidental hospitalization and accidental disability along with several other benefits, which will save you from having to worry about healthcare-related expenses in case of an emergency.
However, it is important to note the general cut-off age for most insurance providers in Pakistan is 60 years, which is the same as your retirement age. Therefore, it is pertinent you start planning ahead and purchase life insurance as soon as you start earning since the premium tends to increase with age once you cross 18.
Opening a Savings Account
Last but not least, if you want to set up a retirement fund, consider opening a savings account first. Opening this particular type of bank account will help you secure your savings while also allowing you to accumulate some profit on your deposits in the form of interest.
Almost all banks in Pakistan offer these profit-bearing accounts to their customers and let them acquire a certain percentage of interest on a periodic basis. Unlike fixed accounts, you can access and withdraw money from retirement savings accounts at any time using a debit card, cheque book or online banking service. However, these accounts are not exempt from withholding tax and Zakat deductions.
Whether you are salaried or self-employed, as long as you are earning a fixed income, opening a savings account is an ideal option for you to kick-start your retirement plans.
You can learn more about different types of bank accounts in Pakistan along with their requirements and other details in our detailed guide on the topic.
So, which of these methods are you going to use to start planning for your retirement? While real estate investment is one of the most lucrative options for those nearing their retirement age or professionals who are already in their mid-30s, life insurance and savings accounts are among some of the best options for those just stepping into adulthood.
Meanwhile, if you are worried about saving money in the current economy, please check out our guide on managing your budget during inflation for some useful tips.
Feel free to send us your queries and feedback at blog@zameen.com.
In order to learn more about successful property investment tips, head over to Zameen Blog – the best real estate blog in Pakistan. You can also subscribe to our newsletter on the right to receive the latest updates about the property and construction sector in the country.
