Retirement planning often takes a least priority amidst life's myriad responsibilities. We focus on buying a car, owning a home, raising a family, educating our children, and financing their weddings nut not how to finance it.
It's only upon retirement when we start thinking about securing our future. However, waiting until the last minute to invest can be a risky strategy.
Retirement planning should ideally begin early to ensure comfort, security, good healthcare, and financial sustenance over 15-30 years without regular income.
No matter your income or lifestyle, you can save money every month after paying your bills and fulfilling financial commitments. Even small amounts, when invested wisely, can grow significantly over time.
Mutual funds are an excellent option for wealth creation, allowing you to invest as little as Rs. 500 a month through Systematic Investment Plans (SIPs).
As your income and savings increase, you can raise your investment amount. The power of compounding can work its magic, potentially securing a comfortable retirement.
In India, there are primarily three types of retirement plans to choose from:
1. Debt-Based Plans: These plans invest solely in debt profiles, providing safety and stability, making them ideal for conservative investors.
2. Balanced Plans: These unit-linked plans invest in both equity and debt profiles, presenting slightly higher risk but also offering higher returns.
3. National Pension Schemes (NPS): These government-backed schemes allow investment in both debt and equity markets. At the time of retirement, one can withdraw 60% of the total fund and use the remaining 40% as an annuity payment, with the maturity amount being tax-free.
There are two primary ways to invest in these retirement funds:
1. Lumpsum Investment: This option promises potentially higher returns with market appreciation but comes with more risk and is typically favored by seasoned investors.
2. Systematic Investment Plan (SIP): SIPs are well-suited for first-time investors. They instill a habit of investing over a longer period, creating a pool of funds. It helps new investors plan their retirement benefits more efficiently.
To calculate the amount you would need for retirement, consider factors such as your expected retirement age, life expectancy, inflation, rate of return, and current annual expenses. Using online tools like the Groww Retirement Calculator can help you determine the required amount and the monthly savings needed to reach your retirement goals.
Major Advantages of Retirement Planning with Mutual Funds
– Diversification: Mutual funds offer a diversified investment portfolio, spreading risk. – Professional Management: Expert fund managers make investment decisions on your behalf. – Liquidity: Most mutual funds offer liquidity, allowing you to access your money when needed. – Tax Benefits: Many mutual fund options offer tax benefits, reducing your tax liability.
Don't delay; start planning today for a better tomorrow.