Investment Tips for a Financially Peaceful Retirement

• Team Antworks
• Investment .

In the past, senior citizens typically relied on their kids as far as their financial needs were concerned. But things have changed drastically in the last couple of decades. With the help of increasing income levels, financial awareness, and diverse investment opportunities, it is now possible for the retirees to live a financially independent life.

However, it is very important to start planning for your retirement as early as possible. If a financially peaceful retirement is what you are aiming for, the investment tips mentioned below can be of great help.

1. Start at an early age

When you are in your 20s and 30s, short-term goals like buying a car or a house are what your investment objectives are. Who thinks about retirement in these years, right? But if you want to be financially independent after your retirement, it is very important to start planning for it right now.

Power of compounding is a powerful financial tool that can make huge differences in long-term wealth creation even if there is a difference of as little as a few years. For instance, let us assume that you are 25 years old and you start investing Rs. 1 lakh every year in a debt fund which offers around 8.5% yearly. By the age of 65, the total value of your portfolio would be around Rs.3.5 crores.

However, if you start investing the same amount in the same fund which offers the same returns of 8.5% when you are 30, by the age of 65 the portfolio would be worth around Rs. 2.2 crores. This is a difference of Rs. 1.3 crores just because you started 5 years later. Delay in planning your retirement would only result in loss of money. So, start as early as you can.

2. Buy a term insurance

Apart from your own financial stability, it is also important for you to think about the financial stability of your family, especially when you are no more. A life insurance is an excellent way to secure the future of your family. Buy a term insurance when you are 25-30 years old as you’d probably be free from health problems and the premiums would be lower.

It is recommended that the coverage offered by the policy should be at least 10 times your annual income so that your family can easily keep up with the expenses. When buying, compare the terms and conditions of all the different plans available to select one that perfectly suits your requirements.

3. Do not overexpose yourself to a particular investment

There are now innumerable investment products available. For a better retirement planning, make sure that you focus on diversifying your investment. Do not overexpose yourself to a particular type of investment. While it is alright to take a few risks when you are young, try to avoid investment opportunities which promise unbelievable returns.

Real estate, stock market, fixed deposits, mutual funds, etc. have proven their worth over time. Focus on such investment options to effectively diversify your investment. P2P lending while still very new in India is also a great way to invest and earn handsome returns.

4. Consider inflation

As retirement planning is a long-term goal, inflation too needs to be considered. For instance, if you currently spend Rs. 50,000 a month when you are 30, if the inflation is assumed at 7%, you’ll need around Rs.3.8 lakhs a month when you are 60. In simple words, inflation means that the things will get costlier in future your purchasing power can be reduced significantly on a long-term basis.

When creating an investment plan, ensure that you do consider inflation too. The investment should be done in a way that you effectively beat the inflation which can be done by earning returns that are at least 1%-2% more than the inflation rate.

5. Rework portfolio at regular intervals

Once the investments are done, make a habit of reworking it as per your current financial obligations. For instance, if you are heavily invested in the equity market in your 30s and 40s, it’d be better to switch to debt in your late 40s and early 50s when you are closer to your retirement.

Equity investments carry a much higher level of risk as compared to the debt market. In later years, around 10%-20% of your portfolio should be in the equity markets to avoid any major losses.

While retirement seems very far when you are in your 20s and 30s, it is only with proper financial planning in younger years that you can financially secure your retirement. Use the investment tips mentioned above and start planning as soon as possible to make sure that you get to enjoy the retirement as you’ve always imagined.