Planning for retirement is the process to help you achieve your Financial goals, both during your working years and retired life. But, most people start their Retirement planning at their later stage of life i.e. around 40's. Well, it is important to understand that the earlier you start planning for your life post-retirement and start accumulating wealth, the sooner you will be able to live a worry-free life. Hence, here are the golden steps that one can follow to start planning for retirement.
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Retirement planning helps you to provide financial security to your dependents (family members). This is done by making prudent investments during your working years. It helps you to maintain your desired lifestyle after you retire. Furthermore, it enables you to make the best use of your hard-earned money post-retirement. One of the key benefits of effective retirement planning is to cover for any emergencies arising from the uncertain events during the time to retirement or post-retirement.
This is the first rule you need to religiously follow when planning for retirement. To initiate a retirement plan, working people can sign-up for the Employees’ Provident Fund (EPF). It is a retirement scheme wherein your employer deposits a certain amount monthly in an EPF account and this is deducted from your pay cheque. Those employees who are not covered by the EPF umbrella can opt for Mutual Funds. You can start exploring investment schemes under Mutual Funds, choosing the ones that suit your age profile and risk appetite.
Retirement calculator is one of the ideal ways to estimate how much money one would need to save for their retired life. While using this calculator you would need to fill variables like current age, planned retirement age, regular expenses, Inflation rate and the expected long-term growth rate on investments (or equity markets etc). The sum of all these variable will help you to calculate the amount that you would need to save monthly. This amount will give you the money needed post-retirement given certain assumptions.
An illustration of retirement calculator is given below-
According to this, you can estimate your monthly investments and make a retirement plan accordingly.
Having a diversified Portfolio reduces the rate of risk significantly. The portfolio typically should contain assets across classes, namely –fixed Income instruments, stocks, cash assets and commodities (gold). It is advisable to make a long-term Investment plan at an early age, with a mix of low-risk assets like cash, deposit schemes, etc., along with high-risk assets like equity.
While planning for Early retirement, one should consider Life Insurance and health insurance as an important element, as it gives you and your family income protection. Additionally, it provides financial support over uncertainties, both in business and personal life. There are various types of insurance policies if you want to explore like – Travel Insurance, Home insurance, liability insurance, etc. for relevant needs.
Insurance policies don't only support one during uncertainties or risks, but they are also a very efficient mode of investment when taken through certain policies (Endowment, etc). Insurance encourages savings through schemes that come with a maturity date.
This is an essential part of retirement planning. If you have some kind of loans or liabilities that need to be paid off, do it at the earliest. Most of the liabilities build up due to a use of credit cards. If you are using a credit card, make it a habit that you pay your monthly dues before the due date. Else, one can instruct the Bank to pay off the credit card outstanding on the due date, by debiting your bank account.
An equity fund is a type of Mutual Fund that invests mainly in stocks. Equity represents ownership in firms (publicly or privately traded) and the aim of the stock ownership is to participate in the growth of the business over a period of time. The wealth you invest in Equity Funds is regulated by SEBI and they frame policies & norms to ensure that the investor’s money is safe. As equities are ideal for long-term investments, it is a good early retirement investing option. Some of the Best equity funds to invest are:
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) 2022 (%) Franklin Build India Fund Growth ₹104.789
₹1,558 15.4 33.9 41.9 34.7 22.7 11.2 IDFC Infrastructure Fund Growth ₹35.965
₹762 10.2 25.4 40.2 34.8 20.7 1.7 L&T Emerging Businesses Fund Growth ₹68.084
₹11,552 8.4 28.4 40.2 38.6 23.3 1 Principal Emerging Bluechip Fund Growth ₹183.316
₹3,124 2.9 13.6 38.9 21.9 19.2 L&T India Value Fund Growth ₹83.2925
₹9,289 11.2 27.5 34.5 27.5 19.8 5.2 Aditya Birla Sun Life Small Cap Fund Growth ₹70.8022
₹4,580 4.8 22 32.6 25.9 16.6 -6.5 Tata Equity PE Fund Growth ₹277.405
₹5,973 11.1 22.8 29.1 22.7 16.9 5.9 DSP BlackRock Equity Opportunities Fund Growth ₹467.821
₹8,850 9 21.9 25.1 21.5 18.1 4.4 Invesco India Growth Opportunities Fund Growth ₹67.72
₹4,034 10.2 20.9 24.1 19.7 16.4 -0.4 Kotak Equity Opportunities Fund Growth ₹261.033
₹15,261 5.9 16.9 23.3 21.5 18.8 7 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 7 Dec 23
These are the retirement solution oriented schemes that will have a lock-in of five years or till the age of retirement.
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) 2022 (%) Tata Retirement Savings Fund-Moderate Growth ₹52.4216
₹1,734 4.9 14.8 19.8 14.3 12.9 -1.9 Tata Retirement Savings Fund - Progressive Growth ₹52.8425
₹1,512 6.3 17.7 22.3 15.5 14.1 -3.9 Tata Retirement Savings Fund - Conservative Growth ₹27.6843
₹164 2.2 6 9.7 6.4 7.7 0.1 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 7 Dec 23
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