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WILL YOUR RETIREMENT INCOME BE SUFFICIENT FOR THE LONG RUN?

We all know that there’s no one-size-fits-all retirement. You may wish to travel the world and go on a world tour, while your neighbour might want to garden and read. Likewise, there’s no one-size-fits-all retirement plan. Finding the right mix for your retirement corpus depends on a myriad of factors including your expenses, savings, family, health, and values.

Importance of retirement planning

With longer life spans, retirement can easily last for a few decades. A report by World Bank reports that the average life span of an Indian has risen from 62.58 in 2000 to 68.56 years in 2016. Longer life spans mean a more extended retirement tenure. You would not want to embark on the path of retirement unprepared! Inflation can prove detrimental to your retirement planning. As you experience a rise in inflation, the prices of goods and services tend to rise commensurately. Though everyone is impacted by rising inflation, the blow is greater for retirees who no longer have access to inflation-adjusted earnings to accommodate the rising costs. Besides, retirees usually have a tendency to experience higher healthcare expenses due to various age-related afflictions. All of these factors result in higher expenses during retirement. To meet these expenses, your assets need to produce a higher rate of return than the inflation rate. This is why planning your retirement becomes extremely important.

How to create a retirement kitty?

Retirement planning is a life-long process, and cannot be achieved in a few years. It involves taking different investment decisions at various phases, both before and during the retirement phase.

Let’s understand how to ensure proper retirement planning for your future:

  1. Understand your time horizon
    Two of the most data points for creating an effective retirement plan are your current age and the age at which you plan to retire. This will help you understand the time frame available to you for creating an adequate retirement kitty.
  2. Determine a target retirement corpus
    This involves determining a lumpsum amount required during your retirement considering all your expenses keeping your personal goals and current lifestyle in mind. Firstly, it’s important to make a realistic estimation for your future expenses. Also, don’t forget to factor in inflation, as it can eat up a considerable chunk of your savings.
  3. Invest in mutual funds
    The key to a successful and comfortable retirement is investing early. The earlier you start planning and saving for your future, the easier you path to retirement will look in the future. Why you ask? Time provides one with the magical power of compounding. Also referred to as the eighth wonder of the world, compounding can help you accumulate a huge corpus.
  4. Determine the right mix for your portfolio and monitor it
    Your asset allocation should be based on your risk profile and investment horizon. It’s best to seek the help of an expert who can determine the right mix for your retirement portfolio. Lastly, it’s important to monitor your mutual fund investments regularly.

Though planning for retirement might seem complex, but it can be simplified if you begin early. Remember, time is money. Happy investing!

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