Most of us what to retire early and retire rich. Surprisingly, this is not difficult and all it needs is better planning on our part. In this video, ETMONEY’s Shankar Nath explains the steps one needs to take to that will make your retirement planning an easy and rewarding exercise with almost no intrusion into your current lifestyle
What’s covered in this video:
00:55 How to plan and invest for your retirement?
02:23 Why should you start retirement planning early?
06:32 How to determine your retirement corpus?
10:24 How to build your retirement corpus?
► Link of retirement calculator: https://cdnblog.etmoney.com/wp-content/uploads/2021/04/ETMONEY_Retirement_Calculator.xlsx
► Paper by William Bengen: https://www.retailinvestor.org/pdf/Bengen1.pdf
► Playlist on Mutual Funds : https://www.youtube.com/watch?v=2lHl6JYqgkQ&list=PLeKo6nJG1Qj0YTl5D4WSixpDcgrUh60yg
► Video on NPS : https://www.youtube.com/watch?v=H0452CXiUXc
► Video on EPF : https://www.youtube.com/watch?v=lBagn–KERk
Retirement does not get enough attention as, for most people retirement, it is atleast two or three decades into the future. The reason why one should have a retirement plan are:
1. People are living longer (85 years)
2. Inflation (6% in India)
3. Lack of a government sponsored social security system
👉 Why should you start retirement planning early?
If you have age on your side, then retirement planning can be a very easy exercise as one needs to put in a relatively low investment and then allow compounding to do its work & garner a lot of wealth into your retirement bucket
But if you are someone who is a bit late on retirement planning, then here are some steps that you can take starting today to close the gap
1. Start saving more
2. Rejig your portfolio allocation
3. If need be, increase your retirement age
👉 How to determine your retirement corpus?
Building a retirement plan is about answering two key questions –
1. How much money should you have by the time you hit your retirement age?
2. How to go about building this retirement corpus?
On the question of how much money one needs to have, there are two ways of calculating this – a) using the 4% retirement rule or b) a more scientific retirement calculation method
The idea behind the 4% rule was not about calculating the amount of retirement money you need but to determine how much you could spend during your retirement years without the risk of running out of money
The other scientific approach revolves around answering these five variables
1. At what age are you likely to retire?
2. What is your current monthly expenditure?
3. What’s the life expectancy? (assume at 85 years)
4. What is the expected rate of inflation over the long term? (go with 6%)
5. What are your expected pre and post retirement returns from your investments?
Link of retirement calculator: https://cdnblog.etmoney.com/wp-content/uploads/2021/04/ETMONEY_Retirement_Calculator.xlsx
👉 How to build your retirement corpus?
The process of building a retirement corpus starts with an understanding of how much investable money you currently have and where that money is
The second step involves a projection of how your money will shape up. When doing projections, it is important to match the instrument with its performance assumptions. When making projections, don’t be too aggressive with your mutual funds. It is better to be conservative
The third and final step is to create a plan that takes us closer to our targeted retirement corpus. Since this is a future plan, do give more preference to planned and systematic investment avenues like your EPF or PPF contributions, your NPS contributions and most definitely to your mutual fund systematic investment plans
Infact these are four products we have spoken extensively about on the ETMONEY Youtube channel, we have listed our best video or the ones we like in the description
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