Retirement is the time when everybody needs sufficient financial corpus to live comfortably. It requires investment planning to ensure that your retirement corpus is enough to help you cover your expenses.
Though the retirement amount may vary from person to person, if you plan wisely, you can accumulate a handsome corpus. Let’s check out various investment options for different age groups.
For People Up to 30 Years
The earlier you start saving money towards retirement, the easier it will be for you to build a significant corpus. At an early stage in life, i.e., when you are in your 20s, you have a higher risk appetite and lower financial responsibilities. So, you can take a higher risk and target to earn a higher return on investment. Consider the example of a corpus of Rs 1 crore. If you are 25-year old now, you have 35 years in hand to build a corpus. Even if you invest as little as Rs 1,550 every month and earn an average return of 12% pa on your portfolio, you’ll be able to build a corpus of around Rs 1 cr in a tenure of 35 years.
You can start investing Rs 1000 in equity mutual fund SIP while diversifying into mid-cap and large-cap funds, allocating Rs 500/month to each. You may support the remaining Rs 550 in the debt fund. As your age increases, you can gradually shift fund allocation from equity to debt mutual funds to match with change in your risk appetite.
Age between 30 and 45 Years
Usually, people aged 30 to 45 years are settled in their career and have a stable source of income. They have a family and children, and the financial responsibility is high. Suppose people in this age group had not already started investing towards retirement. In that case, they have approximately 25 years (assuming investment begins at the age of 35) to accomplish the retirement goal. With higher financial responsibility, their risk appetite comes down gradually. So, assuming in this age group, people would settle for an average return of 10% pa in sync with their risk appetite, they need to invest Rs 7500 every month for the next 25 years to get a corpus of Rs 1 cr. They can invest 50% of the investment in equity SIP consisting of large and midcap funds and the remaining 50% of the investment in debt funds. With an increase in age, they may gradually shift fund allocation from equity to debt funds to match the change in their risk appetite.
If You Are Between 45 and 55 Years
As your age increases and you get closer to retirement, your risk appetite keeps falling gradually. So, the level of risk appetite at the age of 45 to 55 years curbs the return on investment to a great extent. Assuming this age group, the investor will be comfortable in taking a risk that can offer a return of around 8% pa. If the investor’s age is 50 years, in the remaining 10 years till retirement, they have to invest around Rs 54000 every month at an 8% pa return rate to build a corpus of Rs 1 cr.
Investor in the age group of 45 to 55 years should diversify their portfolio in the appropriate bank RDs that offers a higher rate of interest along with SIP in debt mutual funds for generating a return of around 8% pa or higher.
Adhil Shetty, CEO, Bankbazaar.com, explains, “To create a sizeable corpus for retirement, it is advisable to invest wisely and be financially disciplined. Keep a check on your expenses. Also, keep in mind that the inflation would undo your good work if you’ve not chosen your investment instruments carefully. Both your income and expenses would increase exponentially in 20 years. Therefore, investors must diversify their investments as per their financial goals, with retirement being one of them.”
It’s important to review your investment portfolio from time to time and make necessary adjustments to match the risk appetite, return requirement and inflation. Depending on your age, risk appetite, investment size and return expectation, you may also explore investment options in instruments like gold, a small savings scheme, shares, Index Fund, etc. Starting early can be the best thing you can do if you plan to retire with a bigger corpus.