Are You 50 Or Older And Yet To Plan For Retirement? Here Is What You Can Do
If you start investing early for your retirement, you can reap the benefit of compounding, so start saving from your first salary itself. Here's what you can do.
Retirement planning is vital for your golden years. Yet, it is easier said than done because most people usually think about their retirement when they are in their mid-career in their 40s or even later. At times, it is the least of their priorities as buying a house, children’s education, marriage, etc. take precedence, and building a retirement corpus fund takes the backseat.
However, as the adage goes, it is “better late than never”. So make a plan even if you are at 50.
Preeti Zende, a Sebi-registered investment adviser and founder of Apanadhan Financial Services, says, “It is always better if you start planning for your retirement from your first pay cheque itself as the early you start the investment requirement is far lesser. You will have plenty of time to multifold these investments to create a required retirement kitty.”
Zende adds, “If you are salaried, then some part of your retirement planning is already done by EPF, so don’t lose heart. But yes, now less time is available for you to accumulate the retirement corpus in the coming 8 to 10 years. Give utmost priority to retirement goal now and start investing in equity and debt in a 60:40 proportion by simply calculating how much monthly investments are required to accumulate the targeted amount.”
She explains with an example: “If a 50-year-old wants to retire at 60 and withdraw Rs 50,000 in today’s cost as post-retirement monthly expenses with 7 per cent inflation and if we consider his expected life expectancy as 85, then he has to target a retirement corpus of Rs 2.94 crore.
“For this, with 9 per cent as portfolio return (60 per cent in equity and 40 per cent in debt initially and as the goal nears, reduces the equity allocation), his monthly investment requirement is around Rs 1.29 lakh with a 5 per cent increase each year for the next 10 years, assuming he has no prior investments to map for this goal.”
So, regardless of your savings, you can start saving for retirement even at 50. Here is how you can kickstart your retirement planning:
Set Realistic Goals:
Planning starts after setting the goal. So, set a realistic goal for the corpus fund based on your current income, expenses and retirement needs. Keep aside money for an emergency and then focus on saving for retirement persistently for the next 8-10 years.
Plan The Post-Retirement Budget:
After you plan your savings and investments, make a budget estimate for the post-retirement period, the income, if there would be any, and all expenditures. After setting the corpus amount required and retirement needs, minimise unnecessary expenses.
Save For Healthcare Needs:
Healthcare cost increases proportionate to old-age-related issues. So prepare for it well. An unexpected health condition may wipe out your years of savings in one go. Hence, consider a health insurance plan that lasts long.
Plan For Regular Cash Flow:
“When you are in your 50s and only 8 to 10 years are left for retirement, your risk-taking abilities are reduced. You can start with 50:50 or 60:40 in equity and debt. Simply start investing in the Nifty Fund and Flexicap funds along with EPF and PPF as debt portion,” says Zende.
Suppose your retirement benefits are in place with an employee’s provident fund (EPF), public provident fund (PPF), national pension system (NPS), or other investments. In that case, consider a periodic withdrawal plan from these avenues to meet cash requirements. You may also use the accumulated amount from these instruments to buy an annuity for steady cash flow. But, if these investments were not made earlier, you may start investing in them now and a portion in equities from which systematic withdrawals can be made to meet your regular cash needs.
Don’t Waste Time, Be Consistent:
You must stay focused on achieving your retirement goal and invest consistently. As it is not an age to experiment with finances, take calculated risks based on your risk-taking ability. Also, try paying off debts, if any, before retirement.
Thus, if you start investing early, it will generate decent returns with a minimum investment, but if you only have 8-10 years, stay focused and invest and save consistently. You may also seek professional help to create an investment portfolio based on your goals and priorities.
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