Factors To Consider While Planning For Your Retirement
The importance of retirement planning should be realized at an early stage. That doesn’t happen in most cases because people do not want to imagine the life that they would be leading when they are old. However, growing old is inevitable and hence retirement planning should one of your top priority goals. When you retire, your main source of income is going to come to a standstill and at that time all the money that you have been saving over the years is going to come to your rescue. This is why it is essential that you build a solid retirement corpus that can suffice at least the next 20 years of your post retirement era.
If you are serious about retirement planning, here are a few things to keep in mind –
Build a retirement budget
Your everyday expenses like grocery, utility bills, house rent, car/bike fuel expenses, etc. are something that is going to be constant even after you retire. Some other expenses like home loan EMI, children’s tuition fees, etc. may come to a standstill but there will be other expenses that you have to take care of. Keeping these recurring expenses in mind, prepare a monthly expense budget. Multiply this budget by 20 years and the figure that you get is the minimum amount that should in your retirement corpus. Also, take inflation into consideration when planning a monthly retirement budget.
Do not rely on only savings
You may be a smart saver and every month you might be saving a good amount of money for your future self. But remember that savings alone are not going to suffice. Again, inflation is going to be your biggest enemy here and it’s something that you will have to keep in mind because the value of your savings may seem worth something but in the long run, the value is going these savings is going to deteriorate.
Do not only rely on conservative investment instruments
Savings alone is not enough; you need to invest these savings so that you are able to benefit from them. However, where you invest your money is equally important. Some investors who are risk averse only invest in traditional investment avenues like FDs, post office, PPF etc. and feel that these investments are enough to achieve their retirement goals. Now with 4% to 5% fixed interest on offer, how can you possibly earn good returns.
One way to change this is by opting for solution oriented schemes like retirement mutual funds. People must not hesitate to invest their money in retirement savings mutual fund schemes as these are going to be long term investments. Mutual funds may seem volatile in the short run, but they are able to perform to their fullest potential in the long haul. Also, retirement funds have outperformed every other type of traditional investment scheme in the past, generating twice as much as what the traditional instruments are offering. Also, when you invest for the long run, you automatically mitigate the investment risk. There are different retirement plans made to suit the risk appetite and retirement goals of different investors.
Retirement mutual fund schemes are mostly hybrid funds. Hybrid funds are mutual funds that invest in both equity and debt. This is why hybrid funds are also referred to as balanced funds. Some retirement funds invest more in equity and less in debt while other retirement funds have more exposure to debt and less to equity. Investors, depending on their risk appetite can invest in a retirement savings fund and give themselves an opportunity to long term wealth creation.
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