5 Important Retirement Planning Steps to take


Be it a salaried individual or someone who is self-employed, people often ignore retirement planning in their youth. But by the time they get serious about building a commendable corpus for their post retirement life, it is usually too late. This is the reason why every individual must take retirement planning seriously. People do not realize is that with retirement planning, the early they start the better it is. Don’t you want to pursue your hobby or crafting antiques out of wood, or want to open a café by the corner like you always wanted? Your dreams could have come to a standstill because of responsibilities but you can always pursue them after retirement. However, this is only possible if you have a decent corpus in your hand post retirement.

Here are the 5 most important things all individuals must keeping in mind while planning for their retirement:

Keep a diversified portfolio that will generate returns over the long term

A well-diversified portfolio is known to mitigate the overall investment risk and may also allow one’s portfolio to generate decent returns over the long term. Diversification avoids concentration risk and also gives the investor’s portfolio to generate returns from different asset classes. Investors these days avoid conventional schemes as they are offering very low returns. Investors, depending on their risk appetite, investment objective, and investment horizon invest in a mix of mutual funds, stocks, bonds keeping in mind that the portfolio should have enough liquidity.

Save for medical emergencies

With old age comes raging medical expenses. The future is uncertain and if an exigency arises after you retire, it is better to have an emergency fund preserved for such moments. Investors should keep a separate budget only for tending to life’s unforeseen financial emergencies. This way they do not have to depend on their estranged relatives or their children for taking care of the medical bills if and when needed.

Do not invest beyond your risk appetite

Sometimes, investors ignore the risks associated with a particular investment scheme because they are more focused on the potential high returns which they might be able to generate. Several times, investors try to imitate the investment decisions of their peers. This is not an ideal way of saving for retirement because your risk tolerance may differ from others. Investors must understand all the risks associated with a retirement scheme before investing. This will give them a clear idea of whether this particular investment scheme is suitable for their risk appetite.

Start early

Now once you retire, you will be living on a fixed budget. Your main source of income will no longer exist but you may still have to take care of grocery bills, utility bills, house rent, etc. People do not realize that they are going to need more money to survive after they retire than they need right now. And if they start early, they will have more years in hand to save and hence, might be able to save a larger sum.

Start a SIP

If you are considering a retirement savings fund for your retirement goals, consider starting a monthly SIP. Systematic Investment Plan (SIP) lets investors save and invest a fixed sum regularly. Investors can save a small sum every month and gradually build their retirement corpus. They can even use an online SIP calculator to calculate the future returns that their monthly SIP investments may be able to generate at the end of their investment journey.