Retirement planning is a critical part of financial planning. The retirement corpus you build should be able to help you sustain your current lifestyle after retirement as well. When you factor in inflation, you realise the amount you need on retirement is much higher than what is determined by a simple calculation.
Here’s what can be done to build your corpus to the desired level, to help you live a comfortable retired life:
- Ensure you have adequate risk cover for your life and your health. Post retirement, purchasing insurance policies may be impossible or expensive due to the age factor. Hence you must ensure you are adequately insured.
- When you have about 10-12 years left for retirement, take a stock of the retirement corpus you will have on retirement with the present level of investment. If you realise you are falling short of the target, the first obvious step in this direction will be to increase your contribution towards this goal. When a majority of your investments are exposed to equity and equity-related instruments, you can achieve your retirement corpus in a easier manner than when compared to debt exposure. However, make sure this suits your risk profile.
- When you get closer to retirement, at say, five years or so, you should look at gradually de-risking your portfolio. This is to insulate your retirement portfolio from volatile market movements, which can reduce the value of the corpus. However, you must not completely move your investments to debt, as you may realise that returns may not match up to inflation. Therefore you should always leave a small portion of your portfolio in equity-based investments to give a fillip to your overall returns.
- When you are nearing your retirement, you may have to meet important goals of your life like your child’s post-graduation or your child’s wedding. When you receive any windfalls or inflow of a large lumpsum amount when you are nearing retirement, use this to meet your goals and do not dig into your retirement savings.
- Invest in instruments which will help you give regular returns after your retirement. Examples of such investments are fixed deposits and dividend mutual funds.
- Repay your debt before you retire. Home loan is the most important liability of any individual’s life. If you do not repay your debt before you retire, this will cause a strain on your cash flows post retirement. This necessitates a larger retirement corpus. Hence make sure you have no outstanding liabilities when you retire.
Saving is always worthwhile, and it is never too early or too late to start saving for your retirement. Retirement savings is usually an ignored concept. Make this a priority. A well-structured financial plan can help you lead an easy, stress-free retired life.