Retirement Planning is a long-range goal, the most important goal. And because of the complexity in its calculation, a lot of investors end up targeting arbitrary retirement corpus targets such as 1 Crore or 5 Crores.
The correct way to plan for your retirement is to speak with an advisor and arrive at a reasonable estimate of your monthly spending in your first year of retirement; and then do the math keeping variables such as life expectancy, post-retirement returns, inflation and current provisioning from other sources such as PF in mind. Most likely, the outcome of the above exercise will prove surprising and eye-opening!
Since 20 years is a very long time horizon, you have time on your side. Take measured risks by investing into a portfolio of equity mutual funds. However, make sure you fully understand the risks involved before you invest.
Assuming long term returns of 12%, you would need to invest around Rs. 80,000 per month through SIP’s to meet your target.
If a SIP of Rs. 80,000 seems high, you could go for a step up plan instead. By starting off with half that amount and stepping it up by 10% every year, you could achieve your Rs. 8 Crore retirement target too, assuming a 12% CAGR. This is a clear example of the power of discipline and regular SIP step ups and how it can help you plan a fantastic retirement!
Source: Livemint
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