After spending your youthful years over career-driven endeavours, there comes a time to put your retirement plans into fruition. Fulfilling extravagant pursuits like visiting the snow-clad Swiss Alps, boarding cruise liners and exploring the Maldives, or enjoying high-tea at 5-star hotels. Or, perhaps, you envision yourself living a comfortable and cosy retirement with your family.
As wonderful as all of these possibilities sound, they all come at a price. This price necessitates the question, “how much money do I need to retire comfortably?”.
Unfortunately, there’s no quick guesstimate to answer that. Retirement funding requirements differ among people, even families! You need to carefully analyse your needs and devise a viable retirement fund goal to begin saving and investing.
How To Estimate Your Retirement Fund
Across the nation, experts have recommended various tips, tricks, and hacks to estimate your retirement savings goal, like the 4% method or advice to save ₹ 10 crores. To accurately measure your retirement needs, ask yourself the following questions.
1. When Should I Retire?
Estimate how long you save until its time to retire
2. What’s My Life Expectancy?
The longer you live, the more you need to save (Hint: Your parents’ lifespan indicates the longevity of your own)
3. Where Will I Live?
Pre-determine whether you would live in your family home or purchase another property; though, it may incur added expenses of debt
4. What Would My Monthly Income Be?
Understand the mixed components that form your monthly income like personal savings, government schemes, and pension plans
5. What Are Your Retirement Expenses?
This includes monthly household bills, travel expenses, medical bills, and fees for shifting to assisted living for geriatrics
Investment Instruments for Your Silver Years
1. SIP (Mutual Funds)
Systematic Investment Plans give you the dual advantage of tax savings with returns between 12% to 20% on long-term investments.
Age Group: 18 years and above
Tenure: 6 months min.
Min. Amount: INR 100 to INR 500 (depending on the bank or institution)
- Compounding interest over long term investments
- Pocket-friendly for those on low-budgets
- Easy to manage your portfolio with fund managers
- Flexibility to increase or decrease the investment amount
2. Retirement Oriented ULIPs
Unit Linked Insurance Plan (ULIP) provides you with life cover and the opportunity to create a significant amount of wealth.
Age Group: 18 to 65 years (or 80 years, depending on the policy)
Tenure: From 5 to 71 years
Min. Amount: Between INR 1000 to INR 1500; it varies across financial institutions
- You may receive Return of Mortality Charges (ROMC)
- Loyalty additions every 5 years during the policy tenure
- Provides you with retirement income up till the age of 99 years
- Tax exemption under Section 80c of the ITA (1961)
3. Public Provident Fund (PPF)
Launched in 1968, PPF enables you to save a considerable portion of your income and save it for a prolonged period. However, it has a lock-in period of 15 years.
Age Group: Guardians can hold accounts for minors or disabled individuals.
Tenure: 15 years and above
Min. Amount: INR 500
- The principal amount is exempt from tax under Section 80C
- Its long-term lock-in period ensures maximum savings
- You can avail of a loan against your PPF
- Make partial withdrawals up to 50% of the account balance of the previous year
4. National Pension Scheme (NPS)
During your working years, opt for the NPS to contribute towards a retirement savings pool with PFRDA regulated fund managers.
Age Group: Between 18 to 65 years
Tenure: Up to 70 years
Min. Amount: INR 500 (Tier 1) and INR 1000 (Tier 2)
- Its portability makes it easy to shift between employers
- The eNPS portal allows you to check your account on the go
- This scheme is secure and well-regulated by the PFRDA
- Choose from a variety of investment options
Don’t wait till it’s too late – start saving for your ideal retirement today!