Retirement planning as the name implies requires a lot of planning and a multi-decade effort.While the corpus that you are targeting may seem daunting right now, it is well within the reach if you invest in a disciplined manner.
For a worry-free and comfortable retirement, you need to start early, choose good products, avoid debt, and review your retirement investment plan from time to time.
You need to build a sizable corpus that lasts at least 25-30 years. Whatever time you have got it is never too late to start. If you are young and have received your first paycheck, retirement planning won't be the first thing on your mind. But an early start can give you an edge as you have a longer time horizon and a higher risk appetite, therefore you can invest in equity-oriented schemes. However, if you are starting late, then you should stick to safer options like fixed deposits, debt-oriented schemes, etc. Inflation, lifestyle, and rising medical costs are crucial factors that must be considered while calculating retirement corpus.
When planning for retirement, it is wise to invest some proportions of the savings in a fixed deposit. This investment option is highly secured and provides guaranteed returns. This instrument ensures that you have funds in hand in case of any medical emergency or other emergencies. However, one must consider inflation-adjusted returns before investing in an FD as the low rates offered on this instrument might not be able to cover even the inflation.
Investment in mutual funds via a Systematic Investment Plan (SIP) is an ideal way to start retirement planning. Many investors prefer SIP because they do not have to time the market, it lowers the investment requirement and helps develop a disciplined habit of saving. The main advantages of SIP investments are rupee cost averaging and compounding effect that helps the investor to generate higher returns. The first thing to consider while investing in a mutual fund for retirement is the amount of time you have till you retire and your risk tolerance. The bigger the investment horizon, the lower will be the SIP amount. Therefore, an early start would give you more time to grow your money and the power of compounding helps you multiply your wealth. It is also advisable to not keep the monthly SIP amount static and gradually increase it after every year.
Mutual funds also have the option of providing income post-retirement via a Systematic Withdrawal Plan (SWP).It allows you to withdraw a predetermined amount from your investment every month.
A Systematic Withdrawal Plan (SWP) is the opposite of a Systematic Investment Plan (SIP). In SIP, you decide the amount and the date on which the money is debited from your bank account and transferred to the mutual fund. With SWP, the amount is debited from the mutual fund and transferred to your bank account. Hence, for a retired individual, this is the best way to seek regular income.
Building your retirement kitty is simple and easy if you start early and invest in the right funds to lead a tension-free and comfortable retirement. We at Nivesh will guide you with the right advice to make informed decisions about your retirement and create a suitable retirement investment plan for you.
This answer is different for everyone as it depends on the post-retirement expenses and lifestyle of the retiree. However, many financial experts suggest that the simplest way of deciding financial requirements post-retirement is to list down your monthly expenses and calculate the present value of that amount. Then take the inflation rate and calculate the current amount compounded at the inflation rate for the period till you retire. However, most of the time your financial advisor will help you determine this figure.
Retirement mutual funds invest in a mix of securities comprising equity instruments and fixed-income instruments. Generally, there is a lock-in period of 3-5 years. Most of the schemes levy an exit load on redemption before the retirement age and offer a Systematic Withdrawal Plan (SWP) which allows you to withdraw a predetermined amount from your investment every month.
To meet the post-requirement expenses, you can opt for a Systematic Withdrawal Plan in your retirement scheme. There is no need to buy an annuity as in the case of the National Pension Scheme or any other pension plan offered by insurance companies. Some of the retirement plans have a 100% exposure to equities whereas NPS restricts equity exposure to 50%. Mutual Funds’ Pension Plans offer greater liquidity as you can withdraw your corpus anytime after the lock-in period.
Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund, or designing a portfolio that suits your needs.
Copyright 2024 & Design By SVP Creatives