People often ignore retirement planning because who wants to think of old age when one is in their prime youth? However, those not taking retirement planning seriously struggle to build a solid retirement corpus. You may have to compromise on your current lifestyle if you do not have enough money in the retirement corpus. Since most of your regular income will come to a standstill, failing to build a commendable retirement corpus will only mean you should start getting used to living on a fixed income.

What is retirement planning?

Retirement planning means creating a steady financial resource to help you with your post-retirement financial woes. After you retire, expenses like traveling to work may stop, but other recurring expenses like house rent, utility bills, monthly groceries, etc., remain. With proper retirement planning, if you manage to save and invest a fixed sum regularly till you retire, you might be able to build a commendable corpus that will help you take off all such expenses.

Why does one need retirement planning?

When you grow old, you may face some unforeseen financial emergencies. At that time, you do not want to burden your children financially or want to depend on your estranged relatives for financial favors. A solid retirement corpus ensures you enjoy financial freedom even after retirement.

Benefits of retirement planning

Unlike the USA, which has a 401K policy for all retirees, India does not have a retirement policy for its senior citizens. Most individuals rely on employee and public provident funds for retirement, but these might not be enough to cover all their post-retirement needs. Thus, planning for your retirement well in advance will only ensure you have a decent corpus in your kitty.

The medical costs in India are constantly on the rise. Ten years ago, the average consultation with a physician cost around Rs. 300 to Rs 500. The exact consultation charges in private clinics and hospitals have risen to Rs. 2000. Imagine the medical bills you must pay when you reach retirement age. If you start planning for your retirement early, you will have saved enough to cover all your medical expenses and not have to rely on anyone for financial favors.

How to plan for retirement?

You can consider building a solid retirement corpus by investing in mutual fund schemes like hybrid funds. Hybrid funds invest in equity and debt asset classes, making their portfolios well-balanced. Since investors planning their retirement might not want to expose the entire investment sum to the dangers of volatile markets, a mutual fund portfolio of both equity and debt might work in their favor.

Hybrid funds are designed to combine the best of both asset classes into one single investment. The equity component of the hybrid fund takes risks to generate higher returns. On the other hand, the debt component offers a much-needed cushion, especially when the equity markets turn volatile.

Investors must invest for at least 15 to 20 years to build a commendable retirement corpus. So, investors can opt for the monthly SIP option to ensure they regularly support a small sum. A systematic Investment Plan (SIP) is the best way to create long-term wealth like a retirement corpus.