Are you in your 20s or 30s, all hale and hearty, enjoying and learning different life lessons? In this busy life, holidays are our savior, giving us some personal as well as social gateways. Many of us plan for every other weekend, but we forget to plan for the most extended holiday of our lives, ‘Our Retirement Life’.
Why should you be planning your retirement right now? Isn’t it too early? What if I tell you that even 50 lakhs will not be enough when you retire? Yes, that’s true, read on to know why (Tip no 3).
The truth is that many industry experts say that you should start planning for your retirement from the very first day you start earning. Haven’t done this? No worries.
Retirement planning is one of the most significant financial goals for anyone. Hence while you are working, you need to ensure that your lifestyle does not suffer during your retirement. Follow these five tips for retirement planning, and you should be on our way to a happy retirement life.
1) Start Today…Let your plans roll on the floor!
Start saving now. In fact, start investing now. If you feel that its too early, you are wrong. Understand that the earlier you invest; the better returns are generated due to the compounding effect. For example, a person investing at the age of 25 years may require to invest Rs 500 per month to accumulate wealth as per his retirement goals. If he starts his investment at the age 35, he will have to invest, lets say, Rs 1000 instead of Rs 500 monthly.
2) Income increasing? Increase your investment too!
Got a promotion? Salary figures increased? Congratulations, well-deserved! Ok wait, don’t make some massive spending plans right away. The right thing that you should be doing is increasing your retirement investment value. Why? Read on…
Suppose you are 30-year-old and having Rs. 50,000 monthly salary. If you are currently investing 10% of your salary in your retirement scheme (with 9% interest per annum), by the time you are 60, you will accumulate Rs. 92,00,000.
And if you get a salary hike of let’s say 10% every year, instead of spending it immaturely, you decide to increase your investment, then you accumulate a retirement corpus of up to 2.76 crores. Pretty impressive right?
Tip: A SIP investment plan gives you the opportunity wherein you can invest systematically. There are various mutual funds wherein you can systematically invest through Systematic Investment Plan (SIP) without putting a burden on your finances. Moreover, when you make use of SIP investment plan, you don’t need to time your entry into the market as you can invest systematically at regular intervals and thus, ditch the market volatility.
3) Retirement Corpus… Set it Right!
Let’s say you have the corpus target of let’s say 50 lakhs, with annual expenses are 3 lakhs. If you are 30-years-old, by the time you become 60, your annual expenses will increase above 15 lakhs taking inflation in the account. You will run out of money within 3 to 4 years (50 lakhs /15 lakhs).
Nobody wants this! So, what is the solution?
Use the online retirement calculators available for the SIP investment plan. Calculate your target corpus by taking reasonable assumptions. The output that you get, will be a good starting point to decide on your retirement corpus value. This will help you adhere to a proper SIP investment plan discipline.
4) Don’t put all your eggs in one basket, “Diversify”!
Any sound investor will tell you that the more diverse a portfolio, the safer it is. A person heavily involved in just one type of investment is more vulnerable to financial problems associated with the markets.
Don’t stop with just stocks and bonds, invest in largely unrelated sectors, like pharmaceuticals and telecommunications for the matter of fact.
5) Look for Inflation invasion!
Currently, inflation has become an inevitable part of our existence and will see a similar trend in the future too. With the ever-rising inflation rates, it is expected to consume the savings of our retirement also. So, it goes without saying that our retirement plans need to be strengthened.
Tip: SIP investment plan is one of the preferred modes of investing for a happy retirement life. In this investment plan, a fixed sum of money is debited into bank accounts by investors periodically and then invested in specific mutual funds. This ensures enough savings from your investments to help you beat inflation and live a peaceful retirement life.
Why are SIP plans best for retirement planning?
- With SIP, investors can leave the difficulties on the other side of the shore as investing in SIP is not difficult. The investor just needs to sign up for any one of the mutual funds schemes and the SIP is put in place for them automatically.
- SIP investment plan is catered to suit every budget; you can start with a monthly investment of just Rs 500.
- This mode of investment is highly flexible and beneficial to investors due to its simplistic approach.
- There are no additional charges for starting with a SIP investment plan. The benefits have no limits, while the cost to start with these plans are nil.
- Investors can take advantage of the SIP online process and enjoy the smooth and hassle-free path.
A systematic investment plan in equity funds is the right strategy if you wish to invest for a longer period of time. These investment avenues also help avoid the temptation of jumping from one asset class to another during certain market conditions.
So, instead of investing money in a lump sum investment, it is better to invest regularly in smaller amounts. The reason being that the lump sum investment may attract returns, but it will not give you the benefit of compounded interest as with a SIP investment plan.
So, what are you waiting for? Turn on your investment mode and start planning your retirement!