How To Build A Big Retirement Corpus: Are you ready for your retirement? At first it may seem that this question is for someone who is going to be sixty years old or whose retirement is very close. But in fact, it is not completely right to think so. It is important to consider this question not only for those who are close to retirement, but it is equally important for those who are still years old to retire. Let us understand that in order to make life after retirement comfortable, it is important to consider such other questions.
How much should you have at the time of retirement?
The first step of retirement planning is to decide how much money you will need to spend your life easily after retiring. To do this calculation, you will have to answer these questions:
- What is your total cost of a month now?
- How much time is left for you to retire?
- During this time, how much inflation is expected to increase, that is, what will be the rate of inflation?
- What will be the approximate rate of return on the investment you make to build a retirement corpus?
The answers to these questions will help you calculate how much your estimated monthly expenses will be after retirement. By this, you will know how much fund or corpus you should raise to get that amount every month. For this, you can take help of any financial planner or retirement planning calculators available on the Internet. An easy formula is that you raise at least 20 times your annual expenditure as a retirement corpus. Whichever way you calculate, once the target of the fund is clear in front of you, then it will be easy to create a strategy for saving and investing.
The sooner you start, the happier the result will be.
A young person may find it odd to think or talk about retirement, but the truth is that the sooner you start planning and implementing retirement, the more corpus you will have at the time of retirement.
For example, if a person invests 10,000 rupees every month from the age of 30 in a Systematic Investment Plan (SIP), then the value of his retirement fund in 60 years is 3 crore 5 lakh 20 thousand, according to the average annual return of 12%. Will be more than Rs. If you started this same investment at the age of 35, then at the age of 60, he will get 1 crore 68 lakh 62 thousand rupees.
That is, a delay of just five years can reduce the retirement fund amount by almost half. If there was a delay of another 5 years in investing, that is, to start putting 10 thousand rupees in SIP every month at the age of 40, then after 20 years, you will get Rs 91 lakh 12 thousand. Whereas the same strategy of investing on starting SIP at the age of 45 will only give 47 lakh 14 thousand rupees at the time of retirement. Obviously, the sooner you start regular savings and investments, the more you will be in the benefits.
Come late, come better, when you wake up, then morning
The above example does not mean that if you are late in planning for retirement, then you cannot do anything now. When you wake up, you can start your efforts too late by following the proverb of morning. You may not get as much benefit from it as you could get when you started years ago, but it is better to take immediate steps for a safe and enjoyable retirement than sitting hand in hand in despair.
If you are starting late, keep these things in mind
If you have started or are going to start saving and investing for retirement corpus, then some things have to be kept in mind.
- Not enough EPF / PPF / FD: Debt instruments giving assured returns, such as provident funds or fixed deposits, have a special place in the strategy of raising corpus that provides financial security at the time of retirement. But if you want to raise enough funds in a short time, then you cannot rely solely on them. After adjusting the increase in inflation, the actual increase in such investment can be very low or sometimes negative.
- Investment strategy should be aggressive, but caution should also be maintained: To make up for lost time, you need to keep a bit of aggressiveness in the investment strategy, but with caution. Here aggressive investment does not mean taking risk without thinking, but investing in equities against debt funds or debt instruments is important. Keep in mind that do not invest in small cap or sectoral funds in order to get high returns in a short time, because they carry more risk. Multi-cap funds with good records may be a better option for you.
- Age-saving strategy: According to age, a thumb rule that shows the strategy of saving and investment can be useful here. This is a thumb rule, at least 20 percent of income in the age of Twenty, 30 percent in Thirties, 40 percent in Forties and at least 50 percent after the age of fifty should be saved. Responsibilities and expenses also increase in old age, so it will not be easy to implement this strategy. But the thing to understand here is that if your retirement is coming close and you are far away from your goal, then you have to put full emphasis on savings and investment.
- Reduce expenses, stay away from wealth destroyers: In order to increase savings and investment, it is necessary to reduce unnecessary expenses and stay away from investments that make wealth destroys. For example, stay away from personal loans or credit card loans at higher interest rates. After the age of forty, do not make the mistake of investing in a second or third property by taking a loan. Such property can prove to destroy wealth rather than increase wealth. Stay away from high cost ‘insurance less investment’ plans. Avoid buying expensive cars by taking a car loan.
- Take health insurance: In the midst of all efforts to reduce expenditure, make sure that your health insurance remains intact. Look at health coverage not as an expense, but as an investment to save you from a huge expense that may come suddenly in the future. If not done, a single health emergency can ruin your entire retirement plan. Also keep in mind that the sooner you take health insurance, the cheaper it will be and it will be easily available.
Despite all the efforts, what should we do if the goal seems distant?
Despite all the efforts, if it is not possible to raise enough funds to meet the post-retirement expenses, there is no need to be disappointed. If you live in a big metropolis, then after retirement, you can also think about moving to a less expensive Tier-2 or Tier-3 city. With this, you will be able to run your expenses even in low budget.
If you have your own flat or house in the metropolis, then you can take a small but convenient house in a less expensive area with a portion of the money you get by selling it and the remaining amount can be used to increase your retirement corpus. If you have your own house in a small city or you have spent the early part of your life there, then this decision can give you a different pleasure. But this decision to change the place at this stage of age should be made only after all other options are insufficient. So by taking care of these things, if you work on a thoughtful strategy, then after retirement, you will be able to live comfortably and worryingly.