How to Retire in Comfort?

Everyone dreams of retiring rich – but if you are not already sitting pretty on a sizeable estate, achieving it can take some smart planning, and commitment.
Nov 2022
3 mins read
Here’s how you can build a sizeable corpus to retire in comfort:

1. Start preparing for your retirement early in life:
The earlier you start retirement planning, the more time your investments have to grow. Compounding is a critical concept in financial management and it becomes more powerful as time lapses.

For example, let’s take two individuals: Rahul, aged 40, and Raj, aged 50.

Rahul Raj
Age40 years50 years
Investment per month up to age 60Rs 25,000Rs 25,000
Investment done till age 60Rs 60 lakh Rs 30 lakh
Corpus @ 12% Compounded Annualised Growth Rate (CAGR)Rs 2.47 croreRs 57.50.lakh
Rahul’s corpus is substantially higher than Raj’s at the time of retirement, primarily because of the power of compounding, which works best over a longer period.

2. Chalk out your retirement needs and timeline:

You must accurately estimate how much money you’ll need in retirement, to figure out how much you should save. The important factors in this calculation are your expected retirement age and life expectancy and the inflation rate, not just for the period of the investment, but also during your retirement itself.
You also have to consider that your spouse may continue to survive long after you are gone and the retirement corpus should help him/her live comfortably too. The corpus should be big enough that you can live on the returns it generates, without dipping into the corpus itself. This is the best way to achieve a comfortable and stress-free retirement.

3. Draw up a budget:
A retirement plan is all about living a desirable lifestyle even post-retirement. For this, you first need a clear picture of what your finances are like now. Based on your monthly and yearly budget reports, you can determine the corpus you would require to sustain yourself after retirement.

There may be a couple of changes that you may have to make over time. For example, expenses like children’s tuition fees, which may be a chunk of your expenditure now, will not exist post-retirement. At the same time, your present medical expenses would be negligible, but they may not necessarily stay the same post-retirement.

4. Increase your allocation as your income increases:
Most people draw up their investment plan at some stage of their career and never review it afterwards. However, not increasing the investment can be a cardinal mistake over the long run, especially since your lifestyle keeps improving and your needs keep growing over time.

Typically, you should plan for a minimum of 10% escalation per year on your investment commitment. If 10% seems to be tough, stagger the increase in a manner that does not hurt your household expenses and other needs.

5. Contribute consistently and stay committed:
Stay consistent and disciplined in your investment journey. Holding your ground and continuing your investments during personal crises, or replenishing the part that you missed due to some unforeseen circumstances, are important habits that will help you build substantial wealth over the long haul. Faltering in your investments midway can increase your financial stress as you approach retirement.

6. Monitor and realign your investment as required:
Regularly monitor and realign your investments to reflect market dynamics and your current risk appetite. As you approach retirement, you will have to strategically lower your equity exposure to stay within your risk profile.

7. Revisit your health and life insurance requirement:
The possibility of ill-health increases as you age, so it’s important to increase your health and life insurance periodically. This will ensure health issues do not drain your retirement funds. Further, your responsibilities will also increase as you age. You should ideally include your family in your health insurance plan by availing of the family floater plan. Similarly, for your term cover, the financial milestones concerning your family members (particularly your children and their education) should be covered adequately.

Retirement planning evolves constantly, and it’s important to plan thoroughly and then update the plan regularly. Follow these handy tips and consult your financial advisor to amass a substantial corpus and retire in comfort.

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