Make the most of your retirement corpus!

Make the most of your retirement corpus!

Retirement planning is one of the most crucial aspects of getting your finances right.
No one wants any complications in their sunset years. When it comes to money, you
definitely need to be well-prepared to avoid an unwanted shock later.
Planning your finances right so that you get to enjoy the most of those carefree days
isn’t that difficult a task. Before helping you make the most of your retirement corpus,
let’s tell you about some mistakes that you surely need to avoid. Here we go:

  1. Inflation-The invisible money eater: Take into account that Inflation monster
    which eats up your money. Without considering it, saving for retirement would
    seem an easy ride!
  2.  NEVER Underestimate expenses: Allocate your expenses first towards
    untimely emergencies and health expenses. See to it, that you won’t suffer by
    not saving for these. It’s wiser to save first than to regret later.
  3.  Keep sufficient funds separate: While saving for your retirement, you must
    ensure to save for an adequate period. It’s always safe to consider all likely
    expenses while doing so. This planning will never leave you disappointed and
    you’ll always have funds even during any unwanted crisis.
  4.  Don’t solely invest in debt: If you understand the inflation concept, you will
    know that Future value of any Current Sum of money will decrease. Hence,
    investing only in Debt is quite foolish. You should invest some part of your
    retirement corpus in equity for capital appreciation in retirement years. After all,
    you do need to fight the inflation, don’t you?

To make the most of that retirement corpus following ways can be adopted:

1.Bank Fixed Deposits:
When it comes to using a conventional way to invest for a long-term, Fixed Deposits
happen to be quite popular. Some of the main features of a Fixed Deposit that make
it one of the top retirement savings plan options are

  • Guaranteed returns
    Compared to a normal Savings Account or a Recurring Deposit, a Fixed
    Deposit comes with better returns. The only thing you need to watch out for is
    premature withdrawal as it may affect your returns.
  • Super flexible
    Although you end up locking your money for a certain duration, Fixed
    Deposits give you a variety of duration options to choose from. The lock in
    period can vary from seven days to ten years. However, this might vary from
    one bank to another.
  • Better risk management
    There are a lot of other investment options that can get you way better returns
    compared to Fixed Deposits. In case you’re looking for a safer way to invest
    your money, you must look into Fixed Deposits.
  •  Emergency exit
    In case of a financial emergency, you can take up a loan against your Fixed
    Deposit. Most banks will let you borrow 60 to 90% of the value of your Fixed
    As the name suggests, this scheme has specially been created for senior
    citizens. Features like assured returns, regular pay-outs and safety of capital
    make it extremely popular. Additionally, this scheme also comes with tax
    benefits under Section 80C and also permits premature withdrawals.

2. Mutual Funds
Investing in mutual funds is one sure way of defeating the inflation and building Retirement
Corpus. There are various Mutual Funds tools like SIP, STP or SWP which can be made use of
towards building wealth.

  • Through SIP:
    It is always advisable to invest in equity systematically. Systematic Investment Plan
    (SIP) is one of the best methods of saving and investing in equity mutual fund. SIPs
    help us to benefit from the market volatility and helps in Rupee Cost Averaging. SIP
    removes the hurdle of timing the market. You should start monthly investment for
    accumulating your inflation adjusted in mix of equity diversified mutual fund and
    debt (EPF / PPF / Debt Fund) or even simply investing in a balanced fund; depending
    upon time to your retirement. Early you start saving for retirement, lower the
    monthly amount required for accumulating the corpus.
  • Through Systematic Transfer Plan (STP):
    You should always start shifting your investments to debt when your retirement (or
    any other financial goal) approaches. It is advisable you start shifting your portfolio
    from equity to debt, 2 to 3 years before your retirement. Shifting the corpus is
    necessary and important because equity investments are very risky, and you cannot
    afford to take high risk till your retirement age. As you should not time the market
    for entering into equity, the same is applicable for exit also. You should shift theaccumulated corpus systematically via Systematic Transfer Plan (STP) an option
    under mutual fund. With the help of STP, you can systematically transfer specific
    amount periodically (monthly / quarterly) from one scheme to another scheme
    (equity to debt and vice-versa) of the same AMC (Asset Management Company). So,
    with the help of STP, you can shift your portfolio to debt systematically. Withdraw through Systematic Withdrawal Plan (SWP):
    Now at the age of retirement, your corpus must have been shifted to debt funds of
    mutual funds via SWP. You can now start withdrawing specific amount of money
    periodically (Monthly/ Quarterly / Half yearly / Yearly) equal to your household and
    other expenses required for your retirement with the help of Systematic Withdrawal
    Plan (SWP) option of mutual funds. SWP provides you with regular income during
    your retirement through withdrawals, along with growth / appreciation of the
    balance corpus in the debt fund.
    4. Post Office Monthly Income Scheme (POMIS)
    Post office offers POMIS among a host of banking products and services, under the
    purview of the Finance Ministry. Hence, it is highly reliable. It is a low-risk MIS and
    generates a steady income. You can invest up to Rs. 4.5 lakhs individually or Rs. 9
    lakhs jointly, and the investment period is 5 years. Capital protection is its primary
    objective5. Tax-free Bonds
    Tax-free bonds are types of goods or financial products, which the government
    enterprises issue. They offer you a fixed interest rate, and hence is a low-risk
    investment avenue. As the name suggests, its most attractive feature absolute
    tax exemption. This is as per Section 10 of the Income Tax Act of India,
    1961. Tax-free bonds generally have a long-term maturity of typically ten years
    or more. Government invests the money collected from these bonds in
    infrastructure and housing projects.

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