Retirement planning is one of the critical aspects of financial planning to have sufficient monthly cash flows post-retirement. It will be essential to build a massive retirement corpus to fund the elevated cost of living due to inflation, increased medical expenses, long post-retirement life, etc. The best ways to boost your retirement corpus are as below:
1. Start investing early: Most people think they can plan at the later part of life as retirement is a faraway truth. To plan well in advance and invest in equity will be the wisest thing for getting the advantage of the power of compounding. One can start investing a small amount early to create a large corpus to have a comfortable life after stopping a paid job. The Bombay Stock Exchange (SENSEX) was 1,000 in 1990, and it touched 50,000 on Jan 2021, which delivered a 14% CAGR in the last 30 years. Had a person invested monthly Rs. 1000 in the BSE index since 1990, he would have had Rs 56.09 lakhs in his account with a total outlay of Rs. 3.60 lakhs.
2. Invest more: People increase their spending when the income increases. Instead of that, they should have started investing more. If you save more, the retirement kitty will be larger. Create a contingency fund for a minimum of 6-12 months of monthly expenses for emergencies in debt. Invest the rest in equity for the long term. In the above example, had the person saved Rs. 2000 per month instead of Rs. 1000, he would have got 112.17 lakhs or 1.12 crore in 30 years.
3. Step up your investment: One can begin with small investments initially to achieve the long-term goal of retirement and increase the investment amount with increments in salary or income, which will help boost the retirement kitty.
4. Risk cover: Ensure good life and health insurance coverage for the family's financial security. With the sudden demise of the family's breadwinner, term insurance taken earlier in life will replace family income. Due to medical inflation, medical treatment costs are inching up.
5. Discard the junk investments: Discard the more expensive, less yielding, tax-inefficient investments, and invest the proceeds into high-yielding ones or pay off the loan.
6. Review and rebalance: The economic environment is very dynamic and keeps changing due to various factors like inflation, interest rates, tax laws, and other socio-political factors. Based on that changing choice of investments and asset allocation.
7. Maintain investment portfolio for the long term: Most of us review the investment portfolio daily and withdraw with some negative return or news. Recent market collapse and recovery due to Covid-19 is the best example for it. People who were nervous and pulled out their investments during the market crisis could not invest back and missed the opportunity.
8. Take help: Retirement planning has to be done earliest in life, disregarding one’s age, which is a very critical need. By taking the help of an experienced financial planner and avoiding investment blunders, one can reach his retirement corpus target, and monthly cash flows as per plan.
Also, read our articles “Is retirement planning necessary," "Making a realistic and winning retirement planning," "Misinterpretations during preretirement investing," “Portfolio Management tips during the retirement period.”
By Team Wealth ATM
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