Retirement is a reality, yet so many people fail to plan for it early in their lives. The initial phase of one’s career is mostly marked by some risky investments, some savings, and lots of obnoxious expenditures. Truth be told, planning for retirement figures least on their list of financial goals. This has led to many of them resorting to late retirement planning.
How much an investment yields has a lot to do with how long you had stayed put in it. This implies how a long investment tenure can help you in achieving the much-desired corpus. Late starters miss out on the compounding effect synonymous with a prolonged investment journey.
Now that you may have realized how much time is already wasted and how you have only a few years left to accumulate a decent retirement corpus, it’s time to take note of the same and plan without wasting your time. You may start with the following steps
Cut down your unnecessary expenses
Your earnings have increased over the years. It is not surprising if your expenses are commensurate in the same proportion. So, narrow down your lifestyle expenses to make more room for increased savings. This way, you will ensure more money is being invested in various plans to safeguard your future. Stick to a budget so that you do not find yourself at a loss of money within the first few years of your retirement. Also, do not invest all your savings in one go. Remember to set aside some money into your emergency fund that you can use to offset some sudden event or disaster.
Start with a bigger investment
You cannot bring back lost time, which is why you must invest more to compensate for the deficit. Your investments must be in large chunks to ensure that an ample amount is being allocated for higher returns. Apart, from the investment tenure, the size of the investment corpus matters, which is why allocating big chunks to various money-making instruments will help to gain more in the long run.
Diversify your investments
Starting so late should not refrain you from taking the desired risks. Do not stick to debt funds or fixed-income plans or government-sponsored schemes for fear of losing out your money to market volatility. Instead, divide your investments into long-term and short-term investments. If you still have 10-15 years left to invest, you can allocate a portion of your earnings to equities and related instruments like stocks, mutual funds, exchange-traded funds (ETFs), and so on. Around 5-10 per cent of your money can be put into gold while the remaining can be put into debt funds, fixed-income instruments, real estate, and more.
Asset allocation matters and must be decided duly after considering the amount and tenure of your investment. A lot depends on how you view your life post-retirement, so choose accordingly.
Do not ignore pension requirement
The importance of having a sizeable corpus to maintain expenses during the post-retirement phase cannot be denied. However, you must not undermine the benefit of a regular pension amount every month. Instead of using the entire corpus accumulated at one go, you may re-invest this amount into high-interest government-sponsored schemes like post office scheme deposits, corporate bonds, and more while relying on the pension amount received.
You can either opt for one of the pension plans offered by life insurance companies or simply register your details with the National Pension Scheme. Investing regularly in this scheme till you turn 60 years old will lend you regular pension benefits as you can turn the entire amount or a portion of it into an annuity.
Starting late can be a bane for many who had shown reluctance to plan their retirement early in life. It can be difficult to make up for the time lost, though a careful choice of investment options and regular investing can still help you garner enough to take care of the golden years of your life.