21 May 2023
A famous quote says, "Retirement is like a long vacation…. The goal is to enjoy it to the fullest, but not so much that you run out of money".
Most of us aspire to a retirement life, as described in the quote, but is it possible to have enough money? It may be possible if you plan early.
One of the most critical factors that can dent our dreams of a financially sound retirement, and one to which we are primarily oblivious, is the continuous rising inflationary pressures on our income and savings. Inflation makes everything expensive and can be the most deterring factor that can plunge our standard of living from high to low. Hoping to maintain our lifestyle during the sunset years while ignoring the impact of inflation on our income can be a fatal mistake.
Proper and early financial planning are necessary cures to ensure that your sunset years are just like a long peaceful vacation.
This blog helps you navigate your way to achieve this very objective.
Shortlist your retirement goals
First, think about what you would like your retirement life to be like. Accordingly, list the essential plans you want to achieve during your retirement. This could include your daily expenditure, healthcare expenses, rent, and even pursuing hobbies like travel, setting up a business venture etc.
Also, keep in mind that if you are planning to retire early, say at 40, your retirement time will last longer compared with someone planning to retire at 60 years.
Calculate the estimated corpus required.
Once you have figured out your plans, it's time to calculate the amount of corpus you will need to achieve these goals. Remember to factor in the inflation before deciding the amount. You can follow the 50:30:20 rule for investments. This rule simply implies that you should spend 50% of your income on your needs, 30% on your wants, and 20% should be saved for emergencies and investments.
Explore appropriate investment avenues:
Savings that lie idle may not suffice for an increased cost of living. So it's necessary if you could consider parking them in various investment avenues, basis your goals and risk appetite. Based on the amount you seek to accumulate at the time of retirement, you can start investing your money in various assets like equities, real estate, mutual funds, commodities like gold, silver, etc. When you invest, it's essential to factor in your risk appetite – how much risk you are willing to take to achieve your investment goals. Most investment assets have associated risks. Besides, one should also look for diversification of investments which can help mitigate risks. Investment vehicles like mutual funds offer options for the diversification of assets based on underlying investment objectives and risk palettes.
Review your investment portfolio and budget:
What is important for you as a youngster may be insignificant for you as a senior citizen. That's why you need to keep reviewing your financial objectives with a focus on retirement needs. You can consider changing your investment amount or investment plan as per your needs. If you don't have an additional cash flow stream for your retirement in the form of a pension, provident fund, fixed deposits, or rental income, you can work towards one now.
So start saving, start investing.
These materials are not intended for distribution to or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions. Investors may consult their financial advisors and/or tax advisors before making any investment decisions.
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