Plan your retirement with the help of mutual funds | Business ...

Posted by admin on Jul 17, 2012 in Finance | 0 comments

PERSONAL FINANCE

Now everyone is concerned about their retirement planning to maintain the same standard of living in future. Even at 5% inflation, an expense of INR10,000 will rise to INR40,000 in 30 years. But most of them are confused about where to invest. One can go for risk free return like fixed deposits and other debt instruments that do not yield returns more than 6%-7% annually in the long run. Though these instruments are safe, inflation wipes out the benefits.

So, people are advised to take some risk by investing in equities to get higher returns. For some people understanding the equity market and looking after the portfolio regularly is a big problem. For them Mutual Funds are the best option. One can minimise the risk quotient by opting Systematic Investment Plan (SIP).By this way a fixed amount of fund gets invested regularly in the equity market. Whether the market is up or down; SIP generally yields good returns. Experts say that in the long turm, the return through SIP is generally 15% irrespective of the market condition.

If one is satisfied with 8% return and prefers debt instruments, then one will be required to save more over a longer period of time to build the required corpus. However, if one moderates to higher risk appetite and wants a 12% return, then one should go for equities and may reach the target earlier. There are many websites that have a retirement calculator section, which helps calculate your required retirement corpus.

If one starts investing INR5,000 per month in mutual funds at 25 years of age and continues till 60, assuming a 15% return, the corpus will grow to approximately INR5,64,13,342. One can always increase the contribution towards retirement fund whenever there is a rise in one?s salary.

Things to remember while planning for retirement

• Decide how much income you require to live comfortably in your post-retirement years. Consider aspects like increased medical costs, vacations but reduce costs like rent, if you own a house. You must map this income on the basis of your current lifestyle.
• Determine how much you need to save regularly, starting today, to have the right amount. Start allocating as much as you can towards your retirement kitty. In case you are currently not in a position to set apart the funds required, start with whatever is at your disposal.
• Select the right retirement plan, which will help you meet your post-retirement requirements.
• Start saving now! Then you will have time on your side and can enjoy the power of compounding.
• Systematically invest a fixed amount every month for your post-retirement years and lead a tension-free healthy retirement.

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Source: http://www.businesseconomics.in/?p=4639

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