How to start building your enviable retirement fund
Updated: Jun 8, 2020
If you are anything like me, the prospect of retirement must seem daunting. Going by the number of questions we receive at the live sessions on our community Life on My Terms on the subject, it is clear that irrespective of age, retirement is something many of us are concerned about.
We all know we need to start planning for retirement so that we are able to maintain a lifestyle that we are accustomed to even when we do not have a salary coming in. The big question, however, remains – how, where and when to start!
To answer the last question first, there is no better time to start than NOW. So if you are also looking for the how and where of starting your retirement planning, here are some suggestions to get you started:
Prognosticate sounds like a heavy word, but it is just a fancy way of saying predict the future. To start a retirement fund, you need to be able to look into the future and predict how much money you will need 20 to 40 years ahead. There are online calculators to help you. On the Basis app, we have a calculator where you feed in your present age, when you want to retire and how much money you think you would need every month to be able to live comfortably. With this information, we will factor in inflation and keeping 80 years as the average lifespan, we will tell you what kind of corpus you need to work towards.
How much money do you need
As an example, we worked with our goal planning feature on the app to work out the details for a 25-year-old who wants to retire at 60. She says that if she were to retire today, she would need ₹1 lakh per month at today’s value to be comfortable. With 35 working years ahead of her and at a conservative 6% inflation rate, she would need around ₹ 7.5 to 8 lakh per month. So when she retires in 2055, she would need a corpus of ₹35 crore. Sounds a lot, doesn’t it?
Don’t let the numbers scare you
The numbers may sound immense, but don’t let that daunt you. The reality is that this corpus will also include all your assets – Mutual Funds, Employee Provident Fund, real estate, Public Provident Fund, etc. Also factor in that as you rise in your career, so will your income. You will be able to save more and invest more. So now that you have started, don’t get put off by the Math.
Break it down
Instead of getting bogged down by the numbers, break it down. Set easy annual goals. Work towards the big picture and get there with baby steps. Invest whatever you can towards your corpus and keep reinvesting your money. Go in for SIPs that you can tailor to your budget – any month you have managed to save more put it into your SIP; any month you get a bonus, invest it. Every small bit helps and you will be surprised at how all the small investments can add up.
Factor in your health
Medical expenses will need to be taken care of. Longevity is a boon of science and genetics and for women, it means that on an average they will outlive their spouses by at least five years. So do invest in a good medical insurance policy.
Tailor your own plan
Customise your path towards your retirement corpus. All of us have various interests, concerns and priorities. So instead of looking for a one-shoe-fits-all solution, find your own unique combination. It could be debt products like Fixed Deposits, Public Provident Fund, Infrastructure Bonds, Debt Focussed Mutual Funds or Corporate Fixed Deposits. You could try equity products like Equity, Mutual Funds, Portfolio Management Services or you could also include real estate.
Your unique plan could be a combination of all the above. If you are younger with prospects of salary increase and no liabilities, you could go aggressive with high-risk high return investments. Whatever route you want want to opt for, be your own Cinderella and find the shoe that fits you best.
At Basis, we are there to handhold you through the process and help you find the perfect fit. Download our app here.