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7 Steps to Plan your Investments for Retirement

By determining your retirement corpus amount, you’re already done with half the work for your retirement investments planning.  Any plan not backed by action can fall flat. So you need to start investing for retirement once you have figured how much you need. Here’s how you should work towards accumulating your retirement corpus.

1. Start investing early

Take advantage of the power of compounding to amplify your investments. The benefit of starting early; the monthly burden is lesser when you have more time in hand. Don’t wait till your late thirties or early forties to start planning for your retirement.

2. Do not play too safe

Higher return is usually associated with higher investment risk. Our parents saved for their retirement by investing in safe products such as fixed deposits, EPF, PPF and traditional insurance plans which may not help you beat inflation when the returns are adjusted for tax.

3. Investment discipline is paramount

It is easy to compromise on a financial goal that is still many years away. You might feel tempted to make a down-payment on a new car from your retirement corpus because you’ve got time for retirement. In fact, retirement savings are the first to get compromised in case of a short-term cash flow crisis. It is essential to maintain investment discipline, set up SIPs and auto-debit instructions for investments in mutual funds, recurring deposits, etc.

4. Diversify your assets

Although you need to invest in equity mutual funds, it does not mean you must invest exclusively in capital investments for retirement. Do not ignore other asset classes. An equity-heavy portfolio near retirement, when the equity markets are in the bear period can lead to a lifetime of financial misery. Diversification across asset classes is important; start with an equity-heavy portfolio and shift to debt instruments as you move closer to retirement.

5. Review and rebalance your portfolio

Review your portfolio regularly to see how your investments are doing and use this opportunity to eliminate underperformers. If your portfolio has underperformed, you may need to increase the investment amount.A bull or a bear run can skew the asset allocation, so you must review and rebalance your retirement portfolio at regular intervals. Based on your investment horizon and risk tolerance, you must keep 60% in equities and 40% in debt. If required, sell some equity investments to invest in debt products during a bull run and vice versa during a bear phase.

6. Purchase adequate insurance

You do not just need comfortable retirement for yourself but your spouse too. Purchase adequate life cover to ensure a comfortable retirement for your spouse. You should also purchase adequate health cover to avoid a dent in your retirement savings due to prolonged hospitalization or illness. Additionally, also set up an emergency medical fund to cover medical expenses not covered under your health insurance plan. Also, maintain an emergency corpus of funds to tide over the short term cash flow crisis.

7. Let your children share some responsibility

Which parent wouldn’t do anything to keep their kids happy? However, do not go overboard. If you don’t want to depend on your children during retirement, let them share some responsibility. For instance, if you fall short of their higher education corpus or the amount required is more than you expected, ask them to take a loan to cover the shortfall. Don’t sacrifice your retirement savings!


Hope that this helps! And a must say again, don’t wait till your late thirties or early forties to start planning for your retirement.

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