Everybody wants a peaceful and lavish retirement life, and therefore they continuously save money to accumulate a large retirement corpus. But, saving money may not be enough because if your corpus is not growing at a higher rate than the prevailing inflation rate, you won’t be able to accumulate a sufficient corpus for your retirement. So, you must beat the inflation in the long-term and ensure a higher real rate of return to make your retirement corpus ‘inflation-proof’. Here are some important tips that can help you inflation-proof your retirement corpus.

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Start Investing Early

The earlier you start investing, the bigger corpus you’ll be able to build for your retirement. For example, suppose you start investing Rs 5,000/month for your retirement at the age of 25 years. When you reach the age of 60 years, you’ll be able to build a retirement corpus of Rs 3.25 crore, assuming a return on investment at 12 per cent per annum. If you delay investment by 10 years and start investing at the age of 35 years, you’ll be able to build a corpus of only Rs. 1.90 Cr, even if you invest double amount, i.e., Rs 10,000/month at a 12 per cent return on investment.

Starting investment at an early age can allow your corpus more time for compounding the return. At a young age, you can take greater risks and look for a higher return on investment, thus generating a higher real rate of return.

Choose Your Investment Wisely And Diversify Adequately

It’s important to recognize your risk appetite correctly. Sometimes people unnecessarily avoid a risk when they can easily take a higher risk and settle for a low return on investment. To make your retirement corpus inflation-proof, you should diversify your investment into different asset classes so that risk can be minimized and, at the same time, the return on investment is higher. At a young age, you can take greater investment exposure to instruments that carry a high risk to earn a high return on investment. Gradually with an increase in your age and as you get close to retirement, you can switch to low-risk investments.

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Efficient Tax Planning

Often people don’t recognize, and a large portion of their income goes towards paying taxes because of their inefficient tax planning. In the long run, if you can plan your taxes efficiently, it can save you lots of money. You can save taxes by using the various available options in accordance with the income tax rule. For example, you can invest up to Rs 1.5 lakh every financial year to get the tax deduction benefit u/s 80C. You can invest in NPS and get additional tax deduction benefits up to Rs 50000 u/s 80CCD. Similarly, you can save taxes by buying a health policy and getting tax deductions up to Rs 25,000 (for non-senior citizens) or up to Rs 50,000 (for senior citizens) u/s 80D. You can use the amount of tax saved to increase your investment towards your retirement corpus and thus make it inflation-proof.

It is important to keep a strict watch on the prevailing inflation rate and accordingly make adjustments in your retirement investment plan.

The author is an independent financial journalist.