A great lifestyle after retirement is everyone’s long desired goal. No doubt, a substantial amount of money in your bank account is instrumental in achieving this dream seamlessly. One of the most common questions asked by people is “How much savings do I need for retirement?”. Most of the people overlook the benefits of a good retirement plan and find themselves in a chaos in their golden years. Not an uphill battle though, if you start saving at the earliest. The earlier you start, the higher is your savings.
Keeping in mind the inflation increasing by leaps and bounds, you must reconsider your monthly expenditures that will help immensely in crafting out the best figures in your account when your retire. Feeling intimidated already? Don’t worry, we have got your back! Let’s delver deeper into it and see what are the factors that play a major role in savings for retirement.
When are You Starting It?
As mentioned earlier, the earlier you start the more you can save until your retirement knocks the door. For example, your age is 25 years and are saving 15-25% of your salary apart from your monthly expenses, then it’s gonna get you a pretty handsome amount of savings down the line. Keeping in mind the gist of all , age plays an imperative role when it comes to investing for your retirement. If you are the lucky one to have a job that provides you pension then you can slash down on the savings and age relatively a little bit.
How You Manage Your Monthly Expenditures?
Managing monthly expenditures judiciously is a bit challenging task and one needs to be plan the expenditures beforehand to achieve it. No doubt, we always try our level best to not to burn a hole in our pockets. Keeping in mind that your retirement funds directly depends on your monthly savings and of course, your lifestyle. For example, rushing to grab your credit card whenever you see your favourite product with labels like no cost EMI adds to it. With the advent of no EMI’s, people are falling prey to the enticing schemes without even checking the hidden charges that later takes a toll on them. Not necessarily you have to compromise with your lifestyle but always keep in mind to save at least 20% of your monthly salary in the form of savings.
Counting on Alternative Source of Income
Until now, you must have had an idea that retirement savings is an exigent matter and relying on multiple sources of income is no longer an exception. One tried and tested way to make your investments work for you in the long run is investing in mutual funds. Still, the thought of refraining from investing in mutual funds prevails among people as seen commonly. One of the most preferred mutual funds scheme is the solution oriented.
Introduced by the Security and Exchange Board of India (SEBI), these funds are immensely beneficial for long term goal planning, especially for retirement planning.Initially, these schemes used to have a lock-in period of three years but now it has been changed to mandatory lock-in of 5 years.
Let’s delve deeper into some more details of these funds along with some of the most preferred solution oriented schemes to invest that you can consider.
Launched on 9th January 2013 by Tata Mutual Fund, the objective of this solution oriented scheme is to help investors to plan their investment goals for retirement. It is a scheme with moderately high risk with minimum SIP amount starting from as low as ₹500 to a minimum lumpsum amount of ₹5000 and has given a return of 16.13% since its launch.
This is another solution oriented scheme launched by Tata Mutual Fund only with the same objectives as that of ‘progressive’. A scheme with moderately high risk with minimum SIP amount starting from ₹500 and has given a return of 16.34% since its inception.
The HDFC Retirement Savings Fund Hybrid Equity Plan Direct Growth is a scheme again with moderately high risk. Minimum SIP Investment being 500 and Minimum Lumpsum Investment is 5000. It has given a return of 16.97% since its inception. The primary objective of this scheme is to ease investors by investing in a blend of securities entailing equity, equity related instruments and/or Debt/Money Market instruments from which an investor can get pension in the form of income after the age of 60 years.
Launched by HDFC Mutual Fund, this plan is rated with moderately high risk. The minimum SIP and lumpsum value is ₹500 and ₹5000 respectively. It has given a return of 16.98% since its inception. It’s quite similar to the Hybrid discussed above in which an investor can get returns after 60 years by investing in a mix of securities.
A moderately high risk Solution Oriented Mutual Fund Scheme by Nippon India Mutual Fund. Minimum SIP and Minimum Lumpsum SIP investment is 500 and 5000. It has provided a return of 7.52% since its inception. The primary objective of this scheme is to provide investors capital appreciation and regular income as a part of their retirement goals by investing in a mix of securities. The investment objective may or may not be achieved; there is no guarantee or assurance for that.
The 50% Funda
Have you ever taken a moment and contemplated on the savings you are backed up with? Research shows that by the time you turn 30, you should have accumulated 50% of annual salary in your account. For this to take place, you need to start saving 20% of your salary at least from 25 years and also a substantial amount in stocks. Alternatively, you can cut down the 50% to 25% by starting saving in your early 20s; so, if you are planning to retire at the age of 65, you will have ample savings to maintain the lifestyle you desire.
What Kind of Lifestyle You Want After Retirement?
A 9-5 desk job for the whole life till retirement sounds daunting and the sole reason why people want to ave to live off a good life on it. Not to mention, it varies from person to person how they want to spend their golden years. You might want take a sunbath at an exotic beach or you might be curious to fulfill that ever longing wish of taking a trip abroad playing with snowballs. Depending on your income, savings and age, you can make each and every wish come true. Needless to say, a great lifestyle would need a greater savings, sometimes at the cost of your needs and demands that can be compromised.
What can We Infer?
Making your way amidst some common as well as inevitable problems of life like marriage, children, parents or a job that’s gone with a gust; you will always have some or the other financial demands gripping in on your way. It’s not mandatory to be consistent, but what’s mandatory is you should never stop saving. Be it less amount or more, you need to always keep an eye on your retirement goal and save accordingly. Once you are aware of your goal, it’s time to pull up your socks and start savings and investing accordingly. If needed, you can consider other potential income sources to back up your savings.
Disclaimer: The views expressed in this post are that of the author and not those of Groww