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Are you prepared for longest vacation of life i.e. Retirement ?

You work hard, put your Khoon Paseena and give it your all to give a comfortable life to your family and loved ones. But you are not going to work for the rest of your life. There will be a time when your active income stops. Active income is a salary gained from particular responsibilities or services done according to an agreed assignment within a certain time limit is referred to as active income. Salaries, tips, fees, commissions, and allowances from the companies to whom you give services are examples of active income. 

So what is your plan for when you stop earning? Did you put some Khoon Paseena towards your retirement fund planning? As a famous Hindi saying goes, Samay Hi Dhan Hai, which translates to Time is Money, you need to plan your Money, implying both your money for spending and your time, in a way that you can live comfortably when you don’t earn an active income. It is becoming increasingly important to plan out your funds uses today so as to have a comfortable life after retirement because your income may stop but your expenses don’t.

In this blog, we shall talk about ways to build a healthy corpus and commonly asked questions about retirement fund planning. Read on to find out more.

Recommended Read: NPS- The Solution To Your Retirement Problems?

Building a Healthy Retirement Corpus

By now it is well understood that you need to plan for your life after retirement. Before understanding ways in which you can build a healthy retirement corpus, let us go through some of the common mistakes that can lead to a lack of the required retirement corpus. Here are common mistakes during retirement fund planning:

  1. Starting late:

When you just begin earning, there is a common thought that might enter your mind when it comes to retirement fund planning which is Bhaut time hai sochne me or there is a lot of time to start thinking about retirement fund. And this cannot be more wrong.

Most people wait until late when they can end up with insufficient funds for the rest of their lives.

  1. Estimating a lower number:

We Indians might believe that once we get our retirement we might not have a lot of expenses. Increasing medical expenses, wanting to travel and explore the world, or the general rise in prices over time are ignored, leading to insufficient retirement funds.

  1. Lack of prioritization:

Most Indian families are heavily focused on meeting the current needs of their families and themselves and often put retirement fund planning on the back burner which might lead to a lesser retirement corpus.

So what can be done to build a healthy retirement corpus? Here are the steps that you can follow for easy building of your retirement fund for a good life after retirement:

  1. Start Early:

Start early to get the benefits of compounding. Let us understand with a simple example; if you invest Rs. 1000 at 8% annual interest, you would receive Rs. 1,080 when the first year ends. The 8% interest will be added on Rs. 1,080 in the second year, giving you Rs. 1,166. At Rs. 1,166, you will get 8% interest next year. As a result, the longer you save and invest, the more time compound interest has to work its magic.

  1. Begin from your 20’s:

After receiving your first paycheck there might be a lot of things that you want to purchase, it might be a new phone or something valuable like a brand new TV for your family. This is well deserved, you earned that money with your hard work, but equally important is to start planning for your retirement at this stage. This way one can get the true benefit of compounding. Depending on your other financial objectives, you can allocate a suitable amount.

  1. Stay Stable in your 30’s:

At this stage in your life, there are some important aspects that need to check off your list as there is an increased income and with it increased responsibility. You should have a suitable health insurance plan for you and your family, an emergency fund, and suitable exposure to mid-cap funds and high growth assets like equity for your retirement needs.

Recommended Read: Tired Of Breaking Into Your Savings Every Time? Start Building An Emergency Fund.

  1. Plan well in your 40’s:

At this stage, the sole focus of the fund allocation is on children’s education and allocating the retirement corpus. It is advisable to reduce the exposure from solely investing in equities and moving towards debt instruments to safeguard their investment. Also, expenses should be closely managed at this stage since. 

  1. Don’t disturb your retirement corpus in your 50’s:

At this stage, you need to take a close look at your assets. It is preferable to sell unused illiquid assets such as land, buildings, and other assets. The expense of real estate maintenance is considerable, and the income is minimal. Keeping financial assets is preferable. In addition to this, mostly the debt should be repaid before entering the retirement phase, as the retirement funds are not necessarily for debt repayments.

Recommended Read: Should You Repay Your Home Loans Early?

  1. Create a wholesome portfolio:

It’s not logical to limit yourself to low-return debt investments. Although they are a secure investment, they cannot be relied upon to help build a substantial portfolio because of the poor returns that are often wiped out due to inflation. To assure growth, it makes necessary to build a diverse portfolio that includes not just debt investments but also equities and other high-return assets.

Conclusion:

Retirement fund planning is essential to figure out the retirement corpus that you would be needing in order to have a comfortable life for when your active income stops. 

At SD Financial Solutions, we can provide you with sound financial planning advice that can be helpful for you in creating a healthy retirement corpus. SD Financial Solutions is committed to providing investors with best-in-class advisory services in order to help them grow long-term wealth. The organization has a dedicated and experienced team of highly qualified and knowledgeable specialists on staff. Who are dedicated and work hard to ensure that the Company’s Brand Promise is met.

You can also get your free e-book here to learn more about financial planning.

Manoj Amarwal
Saarthi Dream
(Saarthi for your dreams)