Retirement planning is not an overnight process, it is a multistep process that requires one to strategically plan their investments so that by the time they reach the age of retirement, they have a commendable corpus in their kitty. Building a financial cushion is necessary as it gives investors an opportunity to remain independent even after their primary income, which is their monthly salary, comes to a standstill.
To start with retirement planning investors first have to think about their financial goals. Then the next step is to determine the time you have in your hand to achieve that goal. Choosing the right type of retirement scheme is equally important is you have several options to choose from. One must choose a retirement plan that suits their investment objective as well as their risk appetite. To grow a decent retirement corpus, investors must invest their savings so that over the time they grow and help them create long term wealth.
Here is your complete guide to retirement planning:
Understand your investment time horizon
The foundation for an effective retirement strategy is entirely based on your current age and the number of years you have in hand before retirement. The more years you have in hand, the higher risks you can take with your investments to achieve a better corpus. For example, if you have 30 years before retirement, you can consider a retirement mutual fund that invests majorly in equity. However, if you have a few years left then you might have to play safe and instead invest in a retirement fund that is more debt oriented with some exposure to equity.
Make a bucket list of your post retirement needs
Investors must be aware that they need to set realistic spending goals when thinking of their post retirement life. If you want to continue to live the same lifestyle that you are currently living, then you may have to increase your investment sums. Do remember that inflation tends to affect the cost of living and by the time your retire, you may have to spend twice as much as you do now to continue leading your current lifestyle. If you feel that you may not have enough financial resources for continuing the same lifestyle, the best thing to do is start getting used to living on a fixed budget. This will ensure that post-retirement you keep all unnecessary expenses at bay.
Invest according to your risk appetite
Retirement planning is the most important financial goal. Do remember that after you retire, the only source of income will be what you have created over the years. You may have some corpus accumulated through Employee Provident Fund or some policies that you invested in, but the investments that you specifically make for a stress-free post retirement life must be able to live up to their expectations. Hence, it is important for investors to consider investing in a retirement scheme that is ideal for their risk appetite. They must not invest in any scheme that does not comply with their risk appetite. Please consider investing in a retirement mutual fund that is managed by an elite team of fund managers with years of experience. Also, investors must consider an AMC that is well established and has earned a reputation over the years. Also, remember that most retirement schemes in mutual funds are hybrid funds that invest in both equity and debt. So your portfolio may get affected by upheavals in the equity market over the short term, but in the long run, they will witness a correction in the portfolio and eventually be able to create wealth.