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How to Invest for Retirement? and Why is it necessary to start investing early?

  • Akshatha Sajumon
  • 21 Jan
  • 5 minutes

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Hey, everyone, my name is Dipika Jaikishan and I’m from Fisdom .

A topic very close to my heart is a topic of investing towards our retirement. So how many of you have already started investing or even though about investing for your retirement a fact to know that the earlier you start the better it is. And is not a cliche statement I am making factually the earlier you start the little investment that you’ll start making at that point of time help you build a larger corpus towards your retirement.

People, unfortunately, tend to start thinking about their of building retirement savings to close to their retirement. I know a case where people at 55 or 50 and wanting to retire at 60 something strikes and think hey I don’t think I might have enough savings towards my retirement. Let’s discuss how savings towards our retirement can be done very well.


So how much should you save towards your retirement?
I think its important to know that the retirement corpus or retirement savings for each person vary for instance I might choose I want to retire at the age of 60 post which I want to take a good vacation every year while my friend might think that he wants to retire at the age of 60 and wants to live a frugal lifestyle than on. Your retirement corpus also depends on what your current state of expenses are , current quality of living whether by the age of 60 by the time your retired you’ve already achieved or already met other financial objectives such as childrens education etc..

With a lot of people in India now choosing to have a children their mid or late 30s the high possibility is that you would go in to your retirement with some or the other kind of loan on your head.

My strong suggestion to you would do no thave Debt when you go into retirement or wait until you’ve covered all your deb till you retire.


So how much should you save towards your retirement?
M thought would be put down your current expenses, put down your expenses in terms of which are fixed, which are variable a which you see may not reoccur at the time of retirement.

For instance when you retire your insurance premium may not be valid at that point of time. And I would also assume that you possibly paid off your own loan etc.. Whatever the value that might be in today’s term I would suggest to inflate that number about 8% by the time you retire and look at that number. For instance, I would take my case I current expenses are about Rs.70,000 without any real liability but yes some odd insurance premium.

If I would have chosen to retire 30 years later than 70,000 would be close to about 2 and a half or 2.8 lakhs this number would vary for each one of us and there are several calculators available online for you to go an evaluate how much you might need.


So how much should you save for your retirement?

Let’s take into consideration 3 cases here.
Since I am a Bollywood fan I’m gonna call these 3 guys as Amar, Akbar, and Antony.

There is Amar who says you know what now I have 10 years left to my retirement I’m earning really well and I can afford to put aside 15,000 per month towards SIP into a mutual fund for y retirement. Then there is Akbar who says you know what I have 20 years left towards my retirement left me to do about 7500 per month for this purpose.
And the last poor guy Antony whos probably earning 20 to 25000 a month who says you know what I can’t afford very much I’m going to do 5000 a month for the next 30 years towards my retirement.
I’d have to look at each of their corpuses with the experience of time all have them have been invested 18 lakh Rs. but their return are stringily different.
If I have to show some numbers to you Amar’s value towards the end of tenure is about 3500000. Akbar’s is about 7500000. And Anton’s is about 1.75 crores what happened there!

A very simple concept that we learned in standard 8th compounding. Compounding apparently is called 8th wonder of the world those who understand it earn it those who don’t pay for it.

Now its left to you what do you do. Save towards your retirement and realize a bit to late an pay for it.

I’m asked several time wether mutual funds are the right savings instrument for retirement?

Let me put situation out here to you, let’s assume you’ve already been working for 10 to 15 years which mean you already have a certain investment that is accumulated in your Employee Provident Fund which is 24% of your basic in most cases.

Then in more often then not we have some of the other kind of endowment policy which is again a fixed return investment.
Keeping both these scenarios in mind both of them are fixed return investment between 7% – 9 % where do you get a higher interest from?
in most cases, these investments only help us match inflation never beat inflation. And if we are looking to build huge retirement corpus we actually need to beat inflation.

My strong suggestion to you would be that if you have more than 5 years towards your retirement start it today, build some amount of investment towards retirement corpus. Identify the funds that you will not touch until retirement and liquid it for a vacation or any odd expense you might regret later.

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Akshatha Sajumon

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