Are You On Track For Your Retirement Planning?

Each one of us would like to create a large enough corpus to lead a comfortable retired life. However, not everyone does what it takes to make it a reality. While, on the one hand, there are those who do not even plan their investments as they get overwhelmed by the challenge of accumulating a large corpus to lead a comfortable retired life, on the other hand, there are others who delay the process fearing that they might end up making wrong investment choices. In reality, retirement planning is not a difficult goal to achieve provided one follows the right steps. Therefore, to retire rich, you must focus on having a proper investment strategy during both accumulation as well as disbursement stage. Here is what you need to do: [EasyDNNnews:PaidContentStart]

Start Investing Early: By starting the investment process early, you get enough time to build a large corpus with smaller contributions through the power of compounding. Of course, the key is to continue this process till you retire. 

Invest in Tax-efficient and simple investment vehicles like Mutual Funds: Tax efficiency of returns on long-term investment portfolio built through mutual funds can improve your post-tax returns. Moreover, mutual funds are flexible, thereby making it easy for you to realign your portfolio as you near your retirement age. 

Invest through SIP: A disciplined approach coupled with an appropriate asset allocation can make it easier for you to achieve this important goal of your life. Remember, investing in a portfolio dominated by equities can generate positive real rate of return, which is crucial for beating inflation. 

Step up SIP amount: It is important to step up your SIP amount every year to ensure discipline in your savings and investment process during the entire accumulation phase. Remember, when you commit to invest a part of your enhanced income in a disciplined manner, you accumulate a much larger corpus. 

Rebalance your portfolio closer to retirement: This is a crucial stage in your process to build a retirement corpus. As you get closer to the retirement age, make sure that you realign your portfolio to suit the likely change in your risk profile and investment objective, i.e., from growth to income and growth. This process can begin a year or two prior to the retirement and must be done in a phased manner. While doing so, it is important to consider the need to stay ahead of inflation even during the retirement phase. 

Plan your investments after retirement judiciously: Generating adequate income after retirement can be quite challenging. Many retirees err by investing their entire retirement corpus into low-yielding instruments with a lock-in period like fixed deposits, small savings schemes, and bonds. By doing so, they not only compromise on liquidity but also fail to keep pace with inflation. To enhance your overall portfolio return and create a balance between risk and reward, you can consider investing in a mix of hybrid and Equity Funds. 

Systematic Withdrawal Plan (SWP) has emerged as a smart option to generate the required income. Through SWP, you can instruct the fund to redeem a particular amount every month on a fixed date and utilise the same as a regular income. In terms of strategy, it works very well as, despite being invested in market-linked products, you retain the control to decide how much you can get every month as an income and also ensure a healthy growth in your portfolio over time. 

Needless to say, you need to be careful in deciding the withdrawal amount as higher redemption amount can jeopardise your chances of ensuring that you do not outlive your money. As a thumb rule, you can consider withdrawing 5-6 per cent of the portfolio value through SWP. By keeping withdrawals within a reasonable limit and investing in a mix of hybrid and equity funds, you can get the desired income and growth during an important phase of your life.

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