RETIREMENT PLANNING: 10 GOLDEN RULES OF FINANCIAL PLANNING AND INVESTMENTS IN 2020

Individuals often wonder what’s the best way of retirement planning and how can it be achieved. You might already know the importance of retirement planning. This article will provide an insight on 1- golden rules of financial planning and investments for your retirement:

  1. Plan for more than you might need during retirement
    At the cusp of retirement, an individual must have a general idea of their income needs after retirement. As a general rule, it’s better to be cautious and plan for more. It is important to start with an estimate of all the expenses.
  2. The 4 per cent rule
    An investor must know how much income he can withdraw from their mutual fund investments. According to this rule, a retiree with a portfolio of 50% equity and 50% debt should be able to survive the funds if he/she withdraws only 4% of the investment each year, adjusted for inflation.
  3. Start retirement planning as soon as possible
    As with any investment plan, the earlier you start with your investments, the better the yields earned on them. As a general rule, you should start retirement planning and creating a retirement corpus as early as in our 20s.
  4. Consider investing in real estate
    One of the best ways to generate a guaranteed source of income is to own property and lease it to earn a rental yield. In the case of multiple assets, the rental income is also higher. As rents tend to increase every year, the rental income also helps to stay ahead of inflation.
  5. Reverse mortgage
    Another way of creating a regular income stream from a property is to opt for a reverse mortgage. A reverse mortgage is not that popular in India. However, it is a good solution for creating an income stream.
  6. Senior Citizens Saving Scheme (SCSS)
    Banks offer an investment scheme for senior citizens who are above the age of 60 years. SCSS falls under Section 80C of the IT Act, 1961 wherein an investor receives tax benefits up to Rs1.5 lakhs.
  7. Post Office Monthly Income Scheme (POMIS)
    POMIS offers fixed monthly, guaranteed returns at 6.6% per annum keeping the initial capital intact and yielding better results than most fixed-income instruments. The maturity period for POMIS is 5 years.
  8. Mutual funds
    It is also wise to invest in mutual funds. Mutual fund investments have higher liquidity and have the potential to offer significantly higher inflation-adjusted returns. They carry lesser risks than direct investments in stocks and yet offer good returns on investment. There are different types of mutual funds available for your needs.
  9. Pension Funds
    Senior citizens should also consider investments in pension funds and saving schemes. These investment options have a low risk-return ratio and also helps to preserve their capital.
  10. Investing in a senior living community
    The cost of living increases as we grow old, especially during retirement. The increased costs may include hiring caregivers, physiotherapy, higher healthcare costs, lifestyle services, etc. Hence, it’s prudent to invest in a senior living community. Over here, the community shares the resources and its costs giving access to a better lifestyle.

Remember it’s never too late for building your retirement corpus. It’s better late than never. Happy investing!