Retirement Mutual Funds – Step-By-Step Approach

Retirement Mutual Funds – Step-By-Step Approach

The reason most individuals work hard during their entire professional lives is so that they have lived a stress-free retirement life. Every individual has a different retirement goal. Some may want to buy a yacht and spend quality time by the beach, others may want to buy their dream home, while some may want to build a wedding corpus for their daughter, or some might want to start a restaurant or a café. Goals and dreams can be endless; however, they can be achieved by planning at an early stage in one’s life.

What is retirement planning and why do you need it?

Right now, when investors are in their prime age, they usually do not think of retirement planning. They feel that they can deal with retirement planning when they are near the age of retirement. However, this may not be the correct approach as you may want to save as much as you can for your golden years. A retirement corpus can be used for a lot of things, especially since most people will be living on a fixed income post-retirement. You are going to need a lot more money when you retire than you do right now, and hence you must build a commendable retirement corpus so that you do not have to depend on your children or estranged relatives later.

How to approach retirement planning?

One can start with retirement planning by following a step-by-step approach.

First step: Identity how much money you need

A lot of people fail at retirement planning is because they start investing without a defined goal or objective. This leads them to inadequately investing during the investment horizon and the result is inadequate surplus. Investors are requested to keep a realistic goal and then to target the desired retirement corpus with investments depending on their risk appetite.

Second Step: Decide by when you want to retire

Although the normal age of retirement is 60 years, a lot of people have the ambition to retire by the age of 45. But to retire this early, they will have to ensure that they have saved enough so that they can tend to their personal and their family’s needs. Investors must comprehend the fact that they are going to have to sacrifice now so that they can financially secure their future. So, you can start building a retirement corpus by subtracting a few luxuries like movie screenings, frequent restaurant dates, and online shopping. If you start building a retirement corpus at an early stage in your life and if you invest adequately, you might be able to retire before the average retirement age.

Third Step: Start a SIP in a retirement fund

Solution oriented schemes like retirement funds can be considered by investors to build a retirement corpus. Such funds come with a predetermined lock-in period of 5 years minimum or till the investor attains the age of retirement. There are plenty of investment plans under retirement funds for investors to suit their risk appetite. For example, a dynamic plan can be considered by investors who wish to have a portfolio that equally invests in equity and debt. A conservative plan can be considered by investors who do not want to take too much risk as this plan will invest more in debt and remaining in equity. On the other hand, investors with a very high-risk appetite can opt for the aggressive plan. Once they decide which plan to choose, investors can opt for a monthly SIP and refer to the SIP calculator to determine how much money they need to invest regularly to achieve the ultimate retirement corpus.

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