India is in the brink of “retirement crisis”, says an investment strategist who has authored a book on the subject. Indeed, with very few people actually saving and investing prudently from early in working life to build a substantial retirement corpus and inflation happily chipping away the insufficient resources that most have been able to put together, post-retirement life can easily lead to financial crisis, if you don’t practise some thumb rules from early years.
Let’s find out half a dozen golden rules that can try to save you from a crisis after you turn 60 and stop earning. “He who retires last, retires best,” is an adage investment advisor Nilanjan Dey keeps repeating, just to buttress the point that ideally you should not stop working after 60, but carry on for a few years more.
Start early
This is a fundamental rule. One gets a head start and needs to invest smaller amounts for the same wealth creation. For example, if someone invests Rs 25,000 through SIP in mutual funds from the age of 25, he/she would put together at least Rs 16.22 crore (with a 12% return). But if someone begins investing the same amount just 5 years later, the corpus becomes Rs 8.82 crore – or, about 50% of the earlier amount.
Split between debt and equity
It is risky to invest the entire amount on retirement into debt. While debt will help preserve the capital, it will hardly beat inflation. Splitting the corpus into Senior Citizens Saving Scheme, FDs (Fixed Deposit), PPF (Public Provident Fund) and mutual funds (large cap or hybrid or flexi cap or balanced advantage funds) will help your money to beat inflation.
Invest in NPS/pension funds
This has become a must nowadays. While NPS (National Pension System) paves the way for long term compounding, one can also buy annuity plans that can be suited to serve your specific needs.
Inflation: A guiding star
No matter at what age you begin to plan for retirement, never lose sight of inflation eroding your corpus. The inflation calculator will tell you that if your family expenditure is Rs 50,000 at the age of 30, it will stand at Rs 2.87 lakh a month to maintain the same standard of living.
The need for retirement planning is acutely felt by everyone these days and all investment strategists are deeply involved in crafting plans for their clients. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
