How do you see your retirement? An opportunity to travel a bit? Not really thought about it?

Whatever you're thinking, it's likely that you'll have more time to do it, as we're living longer.

So who's going to pay for it?

If you are in employment you are automatically a member of Employee Pension Scheme (EPS) operated by the Employees' Provident Fund Organisation (EPFO), India .

The EPS pension won't be up to it. It may be one of the elements that makes up retirement income but it's not much.

How your benefit is calculated under EPS?

Assume that you are a EPF member after 15 th November 1995, the formula of calculation of pension is (Average Salary * Service / 70)

The maximum service for the calculation of service is 35 years. So if you retire with maximum service, your pension will be (Average Salary / 2)

Now the Average Salary is the pensionable salary and not the actual salary you were receiving before retirement.

The pensionable salary is limited to Rs.6,500.

So it's not going to buy a lot by the time you retire – it might not even be sufficient.

We have to face it: we need to be saving too. And most of us aren't doing anything like enough.

The EPS pension won't be enough  

Don't count on it.  

Going by the above benefit description, even if you were actually earning Rs.20,000 per month, your EPS pension will only be Rs.6,500 divided by 2, that is, Rs.3,250  

The first thing you need to target. If you just want a rough idea, multiply whatever income you want by 20. Otherwise, fill in the retirement planner, print it out and take it to a financial planning adviser who will help you work out a more detailed target.

Now how are you going to get there?

Don't put all your eggs in one basket

Say 'retirement planning' and most people will immediately think of pensions. But pensions aren't the whole story.

In fact, you should be looking at two main areas: investments (shares, bonds and, yes, pensions) and property.

These investments are long term and put your money where you can't get your hands on it before you retire.

Shares have traditionally produced better returns than any other type of investment.

However, past performance isn't a guide to the future and they do carry the highest risk . Balancing your investments is vitally important. When you divide your assets between savings and property, you're spreading any risk and giving yourself the best possible chance of a secure retirement.

This balance shouldn't remain the same throughout your life – check with your financial adviser.

Investments

We're not talking about savings bank accounts here. Not only are their returns low but, over the years, rising inflation will eat into the value of what you've saved.

For instance, if your account pays 4% interest and inflation is at 2%, you're only making 2% interest. Every time the inflation rate goes up, what you actually get for your money will fall.

Instead, look to bonds, shares and mutual funds.

Bonds are a bit like IOUs – they'll take your money and promise to pay you back. They also promise to pay you a certain rate of return each year. Corporate bonds are issued by companies and gilts by the government.

Bonds do involve risk. Their value can go down as well as up, and inflation can cut into the purchasing power of the income they provide. What's more, a few companies have failed to pay up what they owe.

Dealing with bonds in India needs sufficient expertise in choosing a bond, regular follow up of investments made (atleast with the companies involved) and a good broker. For a common individual it might be difficult to deal independently.

Many people invest in shares – also known as equities– either through collective funds like mutual funds , or directly in individual companies. Your return comes not only from any growth in value of the shares themselves but also from dividends – regular payments companies make to shareholders .

As shares fluctuate in value, they're a high risk investment, especially if you're only going to hang on to them for a few years. However, historically, in the long term, they've given a far better return than any other type of investment. If you're investing for the long term, you're giving yourself time to recover from dips in the stockmarket.

Collective funds, such as mutual funds, are the low risk way to invest in equities. They are run by professional fund managers so you get the benefit of their expertise and spread your risk across everything they've chosen to hold in their fund.

You can also invest in commercial property through property funds or property shares – you should talk to a financial adviser for more information about all of these options.

Of course, you should also be investing in a pension.

In theory, this is pretty straightforward. You save throughout your working life. And when you retire, there's a pension to provide you with a regular income.

In practice, it is, as you might expect, a little more complicated.

The confusion partly stems from the various types of pension around – essentially, employee pension scheme, occupational and personal – as well as who pays into them, how the money is saved and how they provide you with money once you retire.

What everyone does agree on is that most of us aren't putting enough into our pensions.

There's more about pensions in this feature. It's also worth remembering that pension contributions are tax efficient. And you can't get your hands on the money until you retire, a good idea for most people.