As we hit middle age, the need for retirement planning hits us hard. When you’ve worked your whole life fulfilling your financial goals, you need a corpus that is large enough to sustain you through your retirement without a hitch.
Fortunately, it is a period where you can reap the benefits of your hard-earned investments with significant returns pouring in. While building a retirement corpus of Rs.10 crores is possible, it will not come easy. What you need is a smart financial approach and discipline to reach your goal. How?
This article will walk you through the various steps to save Rs. 10 crores for your retirement.
Perhaps the most important aspect of saving for your retirement is determining your financial needs first. Ask yourself, when do you intend to retire? This is because, the sooner you start planning and saving, the more relaxed your retirement life will be. Starting early also allows you to gain the benefits of compounding for a longer period.
Moreover, before you plan your investment needs, take your existing portfolio into account. This way, you can find the right balance between your goals and expenses to reach your target faster.
Find the right investment mix
When pursuing long-term wealth building, risk-taking is inevitable. Here, the right asset allocation can affect your ability to meet your financial goal of Rs. 10 crores. While small saving schemes and pension plans involve less risk, they are high-cost instruments with low returns.
Contrariwise, depending on your retirement age (and risk tolerance), you can build a hybrid portfolio of debt and equity, such as large, mid, and small-cap stocks and funds, and take on an aggressive approach to achieve better returns on investment.
Before choosing your ideal funds, consider the following factors-
- Understand the fundamentals- Gain enough knowledge of the various investment options to evaluate their soundness. Check out the underlying holdings of funds for a well-informed decision.
- Focus on long-term performance- Before making your final investment choice for a retirement corpus, consider its long-term performance. Find out if it offers consistent returns and how well it sustained when the market was down and focus on eight to ten years of performance.
Additional Read: Smart Retirement Planning with Long Term Investments in Mutual Funds
When it comes to long-term wealth planning, you must consider the effects of inflation. Then, while developing your investment portfolio, it is wise to opt for SIPs in equity funds. SIP is an investment technique that allows investors to invest a fixed amount of money at a fixed interval.
Owing to the high investment returns associated with SIP mutual funds, it can help you to build a corpus big enough to overtake inflation, eliminating its negative effects on the value of money over time.
Combine SIP and Lumpsum
Building a high-value corpus needs discipline and the combination of lumpsum and SIP approach can make it easier for you. Here, even a small SIP investment in mutual funds can grow your funds significantly.
For instance, say, you have an initial capital of Rs. 30 lakhs. Now, the amount you gain when compounded over 20 years is almost the same as investing Rs. 25,000 every month for 20 years. This way, instead of paying a SIP of 1 lakh per month, a lower SIP amount of Rs. 75,000 can help you reach your goal.
So, if you’ve figured out the initial capital, you can leverage the combination of lumpsum amount and monthly SIP to build wealth for retirement.
Additional Read: Top Ways to Generate Regular Incomes during Your Retirement Life
The bottom line
To make the most of your retirement plan, start investing early and pick the right mix of funds to generate more wealth in the long run.
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