Hello Readers!
How are you all? I hope you are all at your home and making yourself safe from the Coronavirus or COVID-19.
When a person gets a job, they have a lot of things in there to-do list in respect with their salary, like buying branded clothes, or exclusive watches or buying new trendy gadgets, going for dine outs and many, but one thing that is not in their list is retirement planning.
During initial years of their career, people do not have any plan regarding their retirement, they believe and love to live a carefree life, but as soon as when they hit their 40’s or 50’s, the mind suddenly strikes with the notion to save for their retirement.
Suppose people wake up one day and the very first thought that strikes their mind, that they have not saved enough for retirement can be worrying. However, it is not too late to make some planning for their retirement.
We all know, it is advisable to individuals that retirement is a long-term goal and ideally it should be planned in the early years of career, but in case if you missed planning for your retirement in your 30’s do not bother. Here I am explaining steps that can put you back in control of your financial future. Read to know about them:
- Assess your financial position- You were not been investing for your retirement, but you must be saving money in your bank account or FD or some other instrument, for your other goals. Here I would suggest, estimate all your investments or savings that you have done until your 50’s, in different instruments like FD (Fixed Deposits), savings account or stocks. Take them all out and calculate them. For instance, you might be in your 50s with total savings worth Rs 25 lakh.
- Set up Your Retirement Goal- Before planning your retirement it is a a mustlculate when you are going to hang up your boots. If you are 50 years in age and are going to retire at the age of 60 then you have 10 years in your hand to plan for your retirement. For your retirement planning first,, you need to decide what lifestyle you are going to live after you retire, modest daily life or one that will involve a high standard of living? To ensure for what life span of retirement you are going to plan, span that lasts 25-30 years, or more. Once you have estimated all these, now it’s the time to calculate an approx. an estimate of your expenses. As per the above example, one needs to target a retirement amount of Rs 1.3 crore or more by 2030 for a worry-free retirement.
- Reach Your Target- As you have calculated an approx. expense required for your retirement, now it is the time to plan how to reach that target. Here for the above target, I would suggest best in Equity Mutual Funds with a SIP (Systematic Investment Plan) of Rs 25,000per month for the next 10 years. It will help you increase your investment by 8 percent every year and will help get close to the targeted retirement amount of Rs 1.3 crore in 10 years.
How to save such a big amount for your monthly SIP?
Here comes the big question, how to save such a big amount for monthly SIP, along with carrying all other necessary expenses? Well at a salary of Rs 1 lakh a month, it will mean raising the savings rate upwards of 25 percent and improving upon it year after year.
If you have unnecessary expenses, that you can leave, and it will not affect you rather will help you save more monthly, then go off cutting unnecessary expenses. You can move to a house that is near to your office, it will help you reduce your transportation cost.
Think of increasing the source of your income, for this, you can go doing extra work of your choice on weekends, like suppose you are fond of photography; you can pick up projects on photography on your weekends.
Debts to Be Cleared Off
Before you move on the track to plan for your retirement, you must clear off all the debts like credit card loans or bank loans, or some other kind of debts if you have any.
Debts on your head eat up all your savings, so it is better to clear them, it will not only save your savings but will help you save more.
Income levels usually peak in your 50s and by this time if you are debt-free, you can save a lot to do the catching up.
So if you are in your 50 has and have not planned for your retirement until, it is high time, follow these steps and plan for stress-free retirement. Although again I would like to advise those investors who have just started their career or is in their 30’s or 40’s, do plan your retirement early along with other expenses, you will have a stress free life.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).