Plan and save for retirement

With a 6% annual inflation rate and 12% return on investment, achieving retirement goals in not an easy task. However, making small changes can create a big difference in retirement corpus.

Dec 23, 2014 11:12 IST India Infoline News Service

Don’t be complacent about retirement planning and start planning and saving for retirement from today itself. With a 6% annual inflation rate and 12% return on investment, achieving retirement goals in not an easy task. However, making small changes can create a big difference in retirement corpus.
 
Start early
Saving for retirement right from the time you start working is the most convenient way in retirement planning. All individuals should contribute a part of their earnings in Public Provident Fund. If you already have an EPF, half of the problem is solved. Apart from the short to medium term objectives, focus on the amount required to live a comfortable life after retirement. If you start early, you will need to save a lot less to accumulate wealth for retirement.
 
Making investments in twenties allows people to invest in risky assets that give higher returns compared to other assets. Indian equity markets have given a CAGR return of 16.85% in the last 31 years. Investors can invest in equity at an early age and can liquidate it later and shift to debt instruments as they approach retirement. 
 
Know objectives
It is important to separate short and medium term goals from retirement planning. The funds invested or saved for retirement planning should not be used for any other purposes. Don’t be complacent and figure out the amount you will require after retirement. To know the funds, you will require at retirement, calculate average monthly expense and add almost the same figure to it. It will be miscellaneous expenses. After it, add the inflation impact and get the amount required at the time of retirement. 
 
The formula is E x (1+r)N, where E stands for yearly expenses, and r stands for the rate of inflation and n stands for years left to retirement.
 
There are several products available in the market that can suit your personal preferences and goals. Some of the products are mutual funds, Unit-linked insurance plans, National Pension System, Public Provident Fund, Employee Provident Fund, equities, bonds, fixed instruments and many more.

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