‘A Smooth Sail’ is what everyone wants for retirement. Many people go on saving endlessly and accumulating assets just to ensure they have enough during their ‘silver’ years. While saving is certainly the first stepping stone towards building a retirement kitty, the process does not end there. Amassing retirement corpus involves figuring out near-to-accurate corpus requirement and executing an investment plan that makes money work harder than oneself.
To ensure that existing lifestyle remains undisturbed by old-year challenges, it is recommended to follow below mentioned basic principals for building a retirement corpus.
1) Know The Number - No matter how dismaying it seems to do the math, there is no getting away from it. It is likely that procrastinating this calculation is only widening the gap between your actual and real retirement needs.
Having Trouble Doing The Calculation? Here’s A Quick Help
- Current Yearly Expenses X Inflation X Number of Years to Retirement = Future Yearly Expenses
- Future Expenses X Post Retirement Years = Retirement Corpus* Discounted by Expected Interest Rate
- Many online calculators are available to calculate the retirement corpus online
2) Make Money Work - Once the retirement corpus is known, it’s time to channelise savings into appropriate vehicles that can fetch better returns. Instead of trying to fill the bridge by overthinking about savings, it will be wise to shift existing investments from conventional products to high-return oriented products. Moreover, regular monthly investments can also be started into equity-based products to make the most of it.
Retirement Planning
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Fixed/Recurring Deposit
5 Yrs & Above
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Equity & Mutual Funds
5 Yrs & Above
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Rate Of Return
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6.50% -8.50%
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12%-14%
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Investment Amount
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10 Lakhs
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10 Lakhs
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After 5 Years
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15 Lakhs
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19.25 Lakhs
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After 10 Years
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23 Lakhs
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37 Lakhs
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3) Start Now - To be able to have enough corpus to last retirement, it is recommended to start investing immediately, irrespective of the amount of savings. It is established that early investors are less likely to sacrifice or reduce their lifestyle expenses post retirement compared to those who start late. Below table is self-explanatory as how early investors reap benefit of time.
Power Of Time
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Age-Group
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20
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30
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40
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Investment Amount Per Month
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Rs 5,000
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Rs 5,000
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Rs 5,000
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Years To Retirement
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40
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30
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20
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Rate of Return
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10%
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10%
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10%
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Corpus At Age 60
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Rs 3.12 Crores
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Rs 1.12 Crores
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Rs 38 Lakh
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4) Don’t Let Retirement Take Backseat - Life is uncertain and there are times that need for higher funds for children education or desire to buy another property or may be new business plan can force one to withdraw from retirement corpus. Such a decision can jeopardise the whole retirement planning and is, therefore, not at all recommended. Under circumstances of urgent financial need, an individual should ideally evaluate other options and costs than drawing out from retirement funds.
5) Staying Disciplined - Lastly, one has to stay focused on building retirement nest, which includes timely reviewing the investments and their returns and adjusting portfolio. As one nears retirement, it is recommended to systematically shift investments to debt-based funds from equity products so as to counter market risk post-retirement.
About The Author: Reenika Avasthi is associated with Inverika Investment Solutions LLP as a Content Writer and Financial Planner. Reenika Avasthi is a Certified Financial Planner and a freelance content writer in the field of personal finance. Her interest in writing and spreading investor awareness motivated her to start blogging.
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