Post retirement life is something that several hard working individuals look forward to. That’s because they dedicate their entire life towards their professional career juxtaposing with fulfilling the duties and responsibilities of being a parent. When they near retirement age, their children are all grown up and independent, they do not have any debt like housing or education loan to take care of and they are the final stage of their professional career. After living a long and strenuous lifestyle, they seek a calm and relaxed lifestyle post retirement. However, in order to make sure that you attain financial independence in order to lead the perfect post retirement life, one must build a retirement corpus that is able to take care of all their needs.
Retirement planning is essential
When you retire, you will no longer receive the fat monthly pay cheque. You may receive a lump sum EPF (Employee Provident Fund) corpus, but that may or may not be sufficient for you to manage your next twenty years or sort. If you do not have an investment in a pension scheme, you will have to solely depend on the EPF corpus and that may not be a good idea in terms of financial sustainability. This is why one must always take retirement planning into consideration while making a financial plan. It is evident that retirement planning and financial planning go hand in hand. When you start investing in a retirement scheme at an early stage in your life, you give your investments more time to multiply and grow along the way.
Mutual funds offer retirement funds as solution oriented schemes which aim at generating income over the long term. Retirement funds are one of the most sought after mutual fund categories simply because they tend to offer far better interest than conservative investment schemes. Also, depending on your current age, the corpus amount you are aiming for and the number of years you have in hand before you can redeem the accumulated gains, investors can choose a retirement fund that ticks all the right boxes for them. However, they should not overlook the most important aspect while choosing a retirement mutual fund which is their risk appetite. Depending on the need of the individual and their risk appetite there are funds available. For example there are retirement plans like conservative that invest less in equity and more in other fixed income securities for those with a low risk appetite. On the other hand, there are aggressive retirement schemes that invest more in stocks and other equity instruments and hold the potential of offering higher capital gains. However, equity markets are volatile in nature and hence one should invest in retirement funds depending on their risk appetite. Another good thing about retirement mutual funds is that one can start a SIP. Systematic Investment Plan (SIP) allows investors to invest fixed amounts at regular intervals in their retirement fund.
How many retirement funds should one invest in to attain financial freedom?
If you want to financially secure your sunset years so that you do have to depend on your estranged relatives or children, you need to have a fool proof retirement plan. However, if you are planning to invest in retirement mutual funds to build a retirement corpus, you need to first evaluate your existing investments. If you have already invested in a PPF (Public Provident Fund) or any other retirement fund, then take those investments into consideration while deciding the investment amount for retirement fund. You can also use an online SIP calculator to understand how much you need to invest at regular intervals in order to achieve the targeted corpus. Also do not invest in more than two retirement funds. Because if you are new to the world of mutual fund investing and do not know how to analyse a fund’s performance, investing in too many retirement mutual funds will just make your life more miserable.
Mutual fund investments do hold the potential to offer decent returns, but they do not guarantee income. Investors are expected to keep this in mind while making an investment decision.