What is Retirement Planning?
Retirement planning is the process of generating a corpus that can support the financial requirements to maintain your current lifestyle after you stop working. Just like you need money today to pursue a decent lifestyle, you also require money to maintain a comfortable life after your retirement.
When it comes to time, investment and planning, we tend to place retirement planning last on our priority list. At a young age when we start earning, retirement planning might not be an interesting way to spend time. But if one gives it a thought, that’s worth it.
Need of retirement planning
Securing your finances well before retirement can help you in:
- Regular monthly income for your day-to-day living expenses to maintain your current lifestyle.
- Fulfilling your dreams and aspirations you put off for later
- The increase in average life expectancy due to better healthcare and progress in science
- To overcome increasing prices of goods and services due to inflation.
- Healthcare costs are rising at an astonishing rate of over 10% p.a. Hence, growing older means more will be your healthcare expenses.
- Now more families are shifting from joint family to nuclear family therefore, reducing the dependence on kids is not possible without proper retirement planning.
- Leave a legacy for future generations.
How To Plan Through Mutual Funds?
Retirement planning can be divided into two steps, the first one is the accumulation phase which is pre-retirement and another one is the distribution phase post-retirement phase.
Step 1. Accumulation Phase:
If a person invests 25000/- Monthly into Equity Mutual Fund through SIP for 15 years and the assumed return of the fund is12% then he will have approx 1.25 cr at the end of 15 years.
Step 2. Distribution Phase:
Now in this step just invest the above corpus generated through SIP into hybrid schemes and start a Systematic Withdrawal Plan (SWP) from it, where you will receive a fixed monthly payout along with capital appreciation in the longer term.
Monthly withdrawal amount 60,000/- from the age of 60 to 100 (40yrs). Post-retirement return @ 8%, balance amount at the age of 100 yrs 9.25cr. in the future, you can increase the monthly withdrawal amount as well.
Happy Investing!!!!
