As of August 2022, around 80% of Indians are not confident about their plans post-retirement. None of us want to become Amitabh Bachchan from Baghban! This is why planning for your retirement years is crucial. Starting the process early gives you enough time to build a good nest egg to serve all your financial needs and even desires after retirement.
Here are 3 financial hacks to help you avoid financial dependency after retirement.
1. Create a Retirement Plan
The sooner you start planning, the better. The first step is to estimate how much time you have to earn from investments. Secondly, understand how much you will need to sustain a good standard of living. Don’t forget to take inflation into account. Now, with the timeframe and goal amount, use a retirement calculator to identify the amount you will need to invest to achieve the desired capital. A convenient and flexible way to invest for retirement is to invest in mutual funds via the SIP route. With a Systematic Investment Plan (SIP), you can start building funds for retirement with as little as ₹100 per month. As your income grows, increase your monthly investments.
2. Save in a Disciplined Manner
Putting aside a small part of your salary each month or quarter is a good way to build a healthy investment habit. Discipline is key to accumulating wealth. And when you start this early, you get the best benefits of rupee cost averaging and compounding. The result is that your money grows faster than it would sitting idle in a savings account. Don’t forget to create a monthly budget and stick to it. Distinguish between needs and luxuries when planning your budget. If you plan smartly, you needn’t sacrifice on desires or aspirations while investing.
3. Choose the Investment Vehicle Wisely
Although mutual funds are market-linked instruments, they tend to offer better returns than most other types of investment. For instance, if you’ve started planning for retirement at the age of 30, you have at least 30 years to make your money grow. Now, check your risk appetite. Do you prefer high-risk, high-return investments that can help you achieve your financial goals quickly or would you rather invest in lower-risk, lower-return schemes that will help you meet your financial goal at the end of 30 years but with less stress. This will help you understand whether to invest in equity-based, debt-based or hybrid mutual funds.
Don’t try to do all the calculations manually. Use the online retirement fund calculator to make an informed investment decision. You can set your target amount in the retirement planning calculator, along with your yearly step-up, to know how to invest to reach the desired amount with the mutual funds available in India.
To fulfil your dreams post-retirement, start planning now. Your financial needs will only increase as you age. Don’t let the lack of finances prevent you from living your best life in your golden years.