Investing for retirement is a crucial aspect of financial planning, and it is never too early or too late to start. Whether you are in your 20s or 50s, investing for retirement should be a priority. To maintain a desired lifestyle after you stop working and to be financially secure when you are old, planning and investing for your retirement from early on is essential.

Retirement can span many years, and depending only on a basic pension will not be sufficient to cover your expenses. To enjoy a relaxed retirement, it is important to be prepared financially.

But while thinking about financial preparedness for retirement, many questions haunt the investor. Questions like – When should one begin to plan for building a retirement corpus? How much money is required for a comfortable retirement? And what measures can be taken to guarantee that there is enough money for retirement?

To find guidance for these questions and to set a plan in motion for accumulating your retirement corpus, read this blog for some insightful strategies on retirement planning.

Let us begin with an understanding of how to calculate the estimated retirement corpus.

It is often recommended that individuals should plan on having at least 70% of their last drawn pre-retirement income to cover their expenses during their retirement. 

Why 70%?

Because as one gets old, the overall expenses relating to EMI payments, office commute, lunches with colleagues, and formal wardrobe might reduce but expenses related to health care, hospital bills, leisure, and travel will be on the rise. Such bills usually are substantial and will require one to be prepared in advance.

However, to be accurate, and consider inflation and other factors, you can leverage this calculator (Calculator Source: Moneycontrol) to get an estimate of the retirement corpus. 

The next concern that arises is when should one start investing to build the retirement corpus.

There is no right or wrong answer to this. But the earlier you start, the more time you have to save and invest, and the more potential your money can grow. By investing early, you can also afford to take more risks with your investments, which can lead to higher returns in the long run.

Ideally, you should start with retirement planning from the time you start earning a stable income in your 20s. 

Now, when a person in their 20s thinks of investing for his retirement, what kind of investments should be picked?

Assuming that individuals in their 20s are amateur investors, with fewer financial responsibilities, they could consider investing in funds like Multicap or Large cap Mutual Funds via a monthly Systematic Investment Plan (SIP).

Multi-cap funds are mutual funds that are required by SEBI to invest at least 75% of their total assets in equity and equity-related instruments at any given point in time. Out of this 75%, a minimum of 25% must be invested in large-cap stocks, another 25% in mid-cap stocks, and the remaining 25% in small-cap stocks. Large-cap companies are the top 100 publicly listed firms in India with stable growth rates and less sensitivity to market volatility.

Thus, for new investors multi-cap and large-cap funds will be a great way to start building their portfolio given the diversification these funds provide for relatively competitive returns in the long term.

Step up as you grow

As individuals grow older and there is a growth in their earnings, it is important to consider stepping up their investments to help achieve their long-term financial goals. Step-up is nothing but increasing the amount of investment in proportion to one’s income. Stepping up can also mean increasing the percentage of saving every month, diversifying the portfolio, potentially taking on higher-risk investments to achieve higher returns, and exploring alternative fixed-income investments that provide very competitive returns and carry lower risk compared to equity products. 

However, as individuals move closer to the target retirement age, rebalancing their investment portfolio annually in terms of portfolio allocation (more allocation to low-risk investments) to reduce risk is required as one prepares themselves to begin withdrawing funds regularly. 

Retirement does not always mean taking little-to-no risk.

The popular advice with regards to a retired person managing his or her investment portfolio is to ‘take it easy with no risk’. But that is not truly the case for everyone. It depends on factors like monthly spending needs, sources of income, risk appetite, lifestyle, and size of one’s investment portfolio.

For a person who has already retired and has a comfortable amount of funds, alternative-fixed income investments can be a great option to explore. These are non-traditional investments that provide fixed returns, are predictable, and not related to the market. Notably, alternative-fixed income investments can be short-tenured too with risk typically lower than equity but higher than Fixed Deposits.

With a proper understanding of the investment opportunities and risks involved, one can earn timely returns (above inflation rates) by investing in corporate debts, venture debts, asset-backed leasing, and invoice discounting from a good, trusted platform. 

Jiraaf’s Alternative-Fixed Income Investment Opportunities

Jiraaf offers investment opportunities for those seeking higher returns on their funds compared to traditional bank deposits. Alternative fixed-income investments available on Jiraaf offer better returns than bank rates (8% to 12% annual returns), while also being less volatile and less risky than equity products. These investment options have tenure generally between 3 months to 36 months and allow investors to diversify their portfolios beyond traditional stocks, mutual funds, bonds, real estate, and gold.

Conclusion

To sum it up, start your retirement corpus-building process as early as possible. While it is important to achieve other financial goals to be achieved at every phase of life, saving for retirement is safeguarding for retirement.

Investing for retirement requires a long-term perspective, consistency, regular monitoring, correction, and reallocation of the portfolio. With patience, discipline, and a solid investment strategy, investors can work towards achieving their retirement goals and enjoying a comfortable retirement.