5 Tips to Boost Your Savings Before Retirement
Saving for retirement must form an important aspect of your financial goal planning at any stage of life, but particularly so when you are in your 50s. Many people make the mistake of deferring retirement planning till it’s too late. The concept of increasing savings remains limited to Employee Provident Fund or Public Provident Fund contributions.
Jul 2022
4 mins read
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Planning your personal finance in advance and enhancing savings as one of your financial planning smart goals can help you maintain a good lifestyle after retirement without compromising on your hobbies, travel and leisure needs, and peace of mind.
Here are some interesting facts to offer you some perspective:
Facts at a Glance - Only 47% of Indians try to increase their savings for retirement to reduce dependence on others for financial needs. - 1 in 4 people believe that the ideal age to start retirement planning is 65 years.
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These findings show how people aren’t as concerned about boosting their savings for retirement as they should be. Experts believe that you need at least Rs. 5.28 crore of corpus to successfully manage your expenses and lead a comfortable retired life.
This is why it’s so important to start planning your personal finance to boost your savings for retirement. Here are 5 ways to increase savings before retirement:
1. Be the early bird (start investing early) – It’s always a good financial planning practice to start retirement planning early. People often leave it for when it is too late. Many just rely on contributing to their Employee Provident Fund (EPF) or Public Provident Fund (PPF). This is not ideal if you want to increase your savings. In most cases, people wrongly calculate the funds they need at retirement or just engage in short-term financial planning goals. Starting early gives you a head start to grow your fund and start earning income from it. For example, if you are 50 years of age and start investing Rs. 10,000 every month for the next 10 years and you retire at 60, you can gather a corpus of Rs. 18.29 lakhs (at 8% average rate of return). If you haven’t done it already, you can still start investments for retirement planning in your 50s.
2. Don’t lose sight of your goals (align investments to goals) – The key to effective retirement planning is to ensure that you keep your short-term and long-term goals, such as a house purchase or child’s education, separate from it. It’s important to ensure that you solely touch the corpus only when you retire. Not having financial planning goals may lead you to become complacent and prevent you from saving enough.
3. Remember that not all portfolios are made the same (customise your investment portfolio based on your age) – There are many investment products in the market that may seem to be the perfect solution for you. However, it’s important to not fall for push campaigns and give careful thought before choosing products. Avoid investing in products that you don’t have strong knowledge of. It’s also important to consider your age when investing, to boost your savings. Your appetite for risk and your time to retirement should decide your investment strategy. As per your risk profile, you can diversify your portfolio and divide your assets between equity, debt and mutual fund schemes in market linked instruments. Experts recommend you should try to save at least 10% of your income and use it to invest in select instruments. In your 50s, while you may have up to 10 years till retirement your priority should be protecting your retirement corpus; suggested investment allocation: 50% equity, 50% debt. Please consult your financial advisor to make an informed decision
4. Don’t forget government schemes (earn around 7%% on your investments) – Investing in government schemes such as PPF can help you earn 7.10% p.a. (as on March 2022) on investments over a tenure of up to 15 years and tax benefit. You may also consider investing in the tax-saving National Pension Scheme (NPS) sponsored by the Government of India. It offers market-linked returns.. It also gives you the opportunity to claim additional tax deductions under the Income Tax Act. Annuity schemes may also be another good option. The benefit is that you receive a fixed pension for the rest of your retired life without any tenure limitation.
5. Keep the money flowing (plan for post-retirement income channels) – Your savings shouldn’t stop when you retire. For a regular post-retirement income, you may choose to invest in government plans and receive benefits even after retirement. Post Office Monthly Income Schemes (POMIS) and the Senior Citizen Saving Scheme (SCSS) are some examples.
These tips will help you ensure that you have considerable savings before retirement. In the absence of this, you may have to depend on others, which isn’t a favourable option. Hence, it’s essential to start your financial planning today and build your retirement fund.
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PGIM India Asset Management Private Limited
(CIN - U74900MH2008FTC187029)
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All the Mutual Fund investors have to go through a one-time KYC (Know Your Customers) process. Investor should deal only with the Registered Mutual Funds (RMF). For more info on KYC, RMF and procedure to lodge/redress any complaints, visit https://www.pgimindiamf.com/ieid.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY. Read more
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