HOW MUTUAL FUNDS CAN HELP YOU IN RETIREMENT PLANNING

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Several investors delay their retirement assuming that they have enough time to plan for their future. These investors could not be more wrong. Only when they near retirement, do they realise the dire mistake they have made. At that point, it’s usually too late for them to plan for a secured and maintain the standard of living that they are accustomed to. To avoid that, we strongly recommend you begin your retirement planning as early as possible with the help of mutual funds. 

One must begin with their retirement planning ideally in their 20s – right from their first paycheck. However, if you haven’t yet, it’s never too late- you can start now. The returns on long-term investment plans such as creating a retirement corpus is dependent on several factors such as rising medical costs, inflation, interest rates, etc.

How much should I invest?

One of the biggest concerns for investors looking to create a retirement fund is determining the right investment amount to invest in mutual funds. To determine this amount, you must evaluate the amount you would need post retirement. Do not forget to factor in various factors such as the rate of inflation, rising medical costs, inheritance, etc. which can significantly affect this amount. You can assume the rate of inflation at 5 to7% per annum. Also, you must have an emergency fund in place. Your emergency corpus will help to tend to several contingencies that come announced in life. 

Let’s assume after careful analysis and calculations, you determine that you would need somewhere around Rs 2 crore to pose to your needs post retirement. Next, assume a general rate of returns offered by your investments. Determine the time you have to achieve this corpus. Using a mutual funds return calculator, you can easily deduce the amount that you must save to ensure a stress-free retired life. 

How can you plan for your retirement?

If you do not have a significant amount to dedicate towards mutual funds to create a retirement fund, don’t worry. You can always start small. SIPs allow you to invest in mutual funds even a small, insignificant amount which when invested at regular intervals for a prolonged duration becomes a substantial amount. SIP provides several benefits to investors such as rupee cost averaging, the power of compounding, systematic and disciplined way of investing, etc. 

You can also consider to reap the benefits of SWP – systematic withdrawal plan. SWPs permit investors to systematically withdraw from their investments at regular periods. For instance, if you have invested a sum of Rs 18 lacs in ABC mutual fund schemes, you can set up an SWP that allows you to withdraw Rs 75,000 each month for 2 years*.

Having a stress-free retired life will allow you to do everything that a retirement is meant for – pursuing your hobbies and spending time with your loved ones. So, plan your retirement with mutual funds today to live a relaxed and supported life tomorrow. Happy investing!

*Examples are purely for illustrative purposes only and in no manner should not be construed as indicative returns on any mutual fund scheme