Experts believe people should start retirement planning early in their lives to be able to accumulate a good retirement corpus. Retirement planning is the process of determining retirement income and the steps and actions necessary to achieve such goals. Planning for your retirement means identifying the various sources of income, chalking out the expenses; implementing the savings habit, calculating the risks and steadily saving/investing towards such a goal.
Retirement planning can sometimes be difficult to achieve as it involves a very steady investment and disciplined savings along with calculating the income requirements in the future.
There are also certain factors associated with retirement planning which impacts its course which sometimes proves to be an obstacle in achieving them like economic growth, inflation, job security, return on investments and rising medical expenditure.
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Rs 1 crore is the magic figure that we all want to save for our retirement kitty. But the question remains – is Rs 1 crore retirement corpus enough to sustain us throughout our golden years? There are several schemes in the market today; which promises the best returns and help achieve this magic retirement portfolio.
Retiring with a good retirement corpus is the dream you may pursue and experts believe that the magic figure of Rs 1 crore is a benchmark for retirement planning. A corpus of Rs 1 crore is enough to sustain us throughout our retirement and allow us to spend golden years stress-free. If put into an immediate annuity plan when you are 60 years old, the corpus can yield a monthly pension of nearly Rs 70,000.
If you want to get back the principal amount of Rs 1 crore, then you can settle for a lower income of around Rs 52,000 a month by investing in a fixed deposit. This income may seem sufficient today but in future, this may not be sufficient considering the effects of inflation and the rise in healthcare costs.
See Also: Pension Plans for Retirement
Inflation is one of the major factors that can disrupt your plans and may jeopardise your retirement planning goals. Make sure you consider inflation as an important factor while planning for your retirement.
Inflation is the rise in prices of goods and services each year. If you consider a moderate inflation rate of 6% a year; this could mean an increase in pension requirements from Rs 52,000 to about Rs 90,000 a month in 10 years. In another 20 years, your monthly pension requirement could be Rs 1.6 Lakh.
Inflation leads to decrease in purchasing power of money, thereby making money less valuable. The target amount of Rs 1 crore may fall short of its purpose; if you do not consider the rising effects of inflation, while planning for your retirement. Your target retirement amount should be adjusted for inflation and therefore working towards a bigger amount may ensure you have sufficient money to take care of the highs and lows during the retirement years.
Your current lifestyle may not be the same as your retirement lifestyle. During your service years, you have to take care of many debts and family liabilities like home loan, caring for the elderly, children’s education and so on. By the time you retire, most of your debts and obligations are taken care of.
Therefore, your retirement corpus will only focus on sustaining your expenditure and healthcare needs. You need to consider the change in your lifestyle while planning for your retirement corpus.
An ideal retirement is where you will not have to depend on your children, financially. A financially stable retirement allows you to live your retirement years on your terms and with complete financial independence.
Planning for your retirement during service years helps identify your expenditure, take better investment decisions and increase your earning capacity by maximizing your return on investments. Listed below are some of the investment options that help maximize your returns and save for retirement:
Investing in stocks or equity mutual funds through SIP; is the best way to meet your long-term financial goals and save money for retirement. Equity has the potential to offer greater returns than any other investment option.
It ensures inflation-beating returns and will help you enjoy tax benefits. You use the online SIP calculator to learn how much you need to invest monthly over a certain time period; to get the desired returns. If you need help in selecting the scheme, then you can check online recommendations of mutual fund portfolios and invest according to your risk appetite.
See Also: Financial Plans For Retirement Benefits
It’s very important to identify investment potential, risk appetite and understand how to do it correctly. You can choose to invest in various types of mutual funds through SIPs.
You can also choose to go for a lump sum investment or can opt for a monthly investment scheme. You can also choose a dividend mutual fund scheme that helps receive a steady source of income. With this steady income, you can accumulate a retirement corpus.
NPS stands for the National Pension Scheme launched by the government to accumulate a good retirement corpus. NPS encourages people to invest at regular intervals across employment; to help accumulate a retirement corpus.
NPS enjoys a tax deduction under Section 80C. You can open an NPS account through both online and offline method. You can hold the NPS account till 60 years. You can withdraw only 20% of the accumulated corpus and the remaining 80% of the amount must be locked in an annuity scheme if you withdraw before retirement. This helps you receive a regular pension after retirement.
A deferred annuity plan is perfect if you have high income and belong to the higher tax paying bracket. The deferred annuity plan helps get income for taking care of your expenditure. You can use the deferred annuity plan to diversify your investment portfolio.
Deferred annuities are a good source of income during retirement years as it helps get steady income and you enjoy a happy retirement.
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