Retirement Ready
Why should you start planning for your retirement early?
Retirement is one of the most significant expenses that individuals need to plan for. Given that retirement is often years or decades away, inflation can significantly impact your savings. Additionally, unlike previous generations, today’s retirees aspire to explore the world and live a fulfilling life during their golden years.
At the same time, there is a growing interest among young people in the FIRE movement - Financial Independence, Retire Early. FIRE advocates saving and investing a substantial portion of your income to achieve financial independence and the ability to retire much earlier than the traditional retirement age.
While planning for your retirement takes a back-seat with priorities of family and other financial goals, and it might seem distant in your mid-twenties, but starting early offers significant benefits.
Invest When You Can: Lumpsum or SIP
There are two effective ways to invest in Retirement Funds:
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Lumpsum Investment:
A lumpsum investment allows you to invest a significant amount all at once, whether big or small. This method offers flexibility as there’s no obligation to invest at regular intervals. However, it's beneficial to keep topping up your investment whenever you have additional funds available. The more you invest, the better your chances of building a substantial retirement corpus.
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Systematic Investment Plan (SIP):
Investing through SIP offers several advantages:
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Convenient Automated Investments: SIPs automate investments, ensuring consistency without much manual effort.
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Disciplined Savings: SIPs promote regular saving, helping prioritize long-term goals over short-term spending.
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Freedom from Market Timing: SIPs mitigate market volatility by averaging costs over time.
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Flexibility of Amount: Start with a small amount and increase it as your income grows, making early investing manageable.
Both methods offer unique benefits, and you can choose the one that best fits your financial situation and retirement goals.
What is a Retirement calculator?
Retirement calculator helps you to calculate the corpus you would need to accumulate to maintain your present/desired lifestyle during retirement. Retirement calculator provides useful estimates as they are based on assumptions and projections, and actual results may vary due to changes in financial markets, personal circumstances, and other factors.
How to use a retirement calculator?
The Calculator allows you to explore diverse permutations and combinations, helping you determine the retirement corpus through various options. The calculator considers the following factors:
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Current age
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Inflation rate
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Retirement age
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Current monthly expenses
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Expected rate of return post-retirement
Once you enter the details, the calculator will display years to retirement, monthly expense at the age of 60, retirement corpus required and monthly SIP and Lumpsum required to achieve retirement corpus at different rate or return.
Reasons to start your retirement planningearly
Rising Cost of living: With the ongoing rise in the cost of living in India, it is crucial to begin saving for retirement at the earliest to maintain one's desired lifestyle post-retirement.
Power of Compounding: Early investments grow more due to compounding, where returns generate their own returns over time.
Financial Stability: Starting early helps build a retirement corpus, ensuring financial stability and peace of mind. With a robust plan in place, you can enjoy the present without financial worries and remain independent during your retirement years.
Aids Portfolio Rebalancing: Starting your retirement planning early allows ample time to fine-tune your investment portfolio and makes necessary changes as needed. This proactive approach aids in effectively managing risks and optimizing returns in the long run.
Helps to reduce stress: Beginning investments at an early stage will simplify future financial planning and savings, minimize stress, and contribute to achieving financial goals.
Maintain Your Desired Lifestyle: Retirement should not mean cutting down on your lifestyle. Starting early can help you build a corpus such that you can sustain your desired lifestyle throughout retirement. It also allows you to account for lifestyle inflation, ensuring you can enjoy the comforts and activities you love without any financial worry.
Transparent and Accessible: Investing in a mutual fund allows you to easily review information about the investment manager's performance and experience, the investment's objective, historical returns, risks, and other relevant details. This transparent and accessible information will assist you in making a well-informed decision regarding your retirement planning.
Tax Benefits: Investing in retirement funds can offer tax benefits under section 80C of the Income -Tax Act, 1961.
FAQs
What is a Retirement Fund?
A mutual fund scheme designed to help you save and invest for retirement, typically investing in a mix of equity and debt.
What is an SIP?
A Systematic Investment Plan allows regular, fixed-amount investments in a mutual fund, promoting disciplined saving.
Why should I start investing in my twenties?
Starting early maximizes growth through compounding and reduces the financial burden over time.
How much should I invest in a Retirement Fund?
Use our Retirement calculator to determine the right monthly investment based on your goals and financial situation.
Who manages your funds when you invest in Mutual Funds?
Your investments are managed by Fund Managers, expert in their fields, reducing risk and enhancing growth potential.
How much money do I need to retire in India?
To determine the required retirement corpus, the initial step involves understanding the time remaining until your retirement. Although the official retirement age in India is set at 60 years, you have the flexibility to opt for early retirement. Opting for early retirement, however, necessitates a larger fund to sustain an extended post-retirement period, given the shorter accumulation phase for your retirement corpus. Commencing your retirement planning journey at the earliest is advisable to facilitate the gathering of sufficient funds within a limited timeframe. Here, a Retirement calculator may help you to calculate the corpus you would need to invest to maintain your present/desired lifestyle during retirement.
Why is it the right time to invest in a Retirement Plan?
Starting to invest early creates a rewarding habit. If you are not saving, it’s time to get started. Make saving for retirement a priority. Devise a plan and stick to it. You may target a specific amount of corpus for your retirement and plan your monthly investments accordingly.
How to build a retirement corpus with Mutual Funds?
In the current financial landscape, mutual funds have gained widespread popularity among a diverse range of investors like you. The appeal lies in their ability to facilitate investment across various asset classes, sectors, and securities, thereby promoting portfolio diversification and serving as a safeguard against market volatility over the medium to long term. Beyond general investment avenues, mutual funds can play a crucial role in retirement planning. There are specialized solution-oriented schemes within Mutual Funds tailored specifically to meet retirement needs. Depending on individual risk tolerance and time horizon, you can explore investment plans such as Equity, Hybrid Equity, or Hybrid Debt investment plans, as offered by the Retirement Funds.
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