Retirement Planning is something each one of us absolutely must do – but some of us take it less seriously than others.

When planning for your retirement, there are a few simple things that will enhance the success of your Plan – and help you retire with a higher level of wealth. These 4 simple points will help you sleep better at night.
 

1. Set the Goal
   
   To do this, you need to first simply check how much you are spending today, on household and other expenditure. Many of us will have only an estimate of this figure- this is probably not the most perfect figure to use. Remember – your goal figure has to be a realistic one, else you will end up saving too much (perhaps compromising other goals) or not enough (and not achieving your retirement corpus).
   
   So how do you set the goal?
   All you need is 2 easy steps.
   Step 1: Track Your Expenses
   You need to know exactly how much you are spending today on househodl and lifestyle and other categories of expenditure. Start tracking today, and remember to also account for annual payments like insurance premiums and so on.
   
   Step 2: Factor In Inflation
   To see how much wealth you need to build to sustain your lifestyle in your golden years, you can either do the math yourself, or use our Retirement Calculator.
   
    
2. Start as early as you can, invest as much as you can
   
   By starting as early as you can, what we mean to say is, start immediately. The power of compounding (which is what will grow your Rs. 1,000 invested into equity today to more than quadruple in 10 years) will work more in your favour, the longer your goal time horizon is.
   
   Invest as much as you can – because even a Rs. 1,000 increase in your regular investments will cause a tidy increase in the wealth you can accumulate.
   
   Consider the case of Mr. Shah – our favourite fictional investor.
   
   Mr. Shah has invested Rs. 10,000 per month into diversified equity mutual funds for the last 20 years. Mr. Shah’s brother started investing exactly 2 years before Mr. Shah, and invested for 22 years. He invested Rs. 10,500 a month into the same mutual funds. He has the advantage of not only starting earlier but also investing a little bit more.
   
   At the end of his 20 years of investing, Mr. Shah accumulates Rs. 1.49 crores approximately – a tidy sum.
   
   At the end of his 22 years of investing, Mr. Shah’s brother accumulates Rs. 2.15 crores approximately – 50% more than Mr. Shah.
   
   The moral of the story is to start today and invest as much as you can.
   
    
3. Follow your Asset Allocation
   
   Your asset allocation will tell you how much into each asset class (equity, debt, gold) you should be, based on your number of years left till your goal.
   For example, if you are going to retire in more than 10 years, then depending on your risk profile, your retirement funds can be channelized primarily into equity, with a 10 to 15% exposure to each debt and gold. However, if you are retiring in less than 3 years, it is advisable to redeem any equity investments and shift towards debt investments that are fixed income in nature, and not linked to the market.
   
    
4. Make the Most of Your Tax Saving Investments
   
   Use Section 80C up to the full Rs. 1 lakh limi, remember this includes your EPF .
   If you have a home loan, use Section 24 (interest on your home loan) wisely. Also see our article on Popular Tax Saving Deductions for more tax deductions that can increase your savings and hence your investible surplus.
   Remember, a rupee saved can be a rupee invested! And we have seen what compounding does to the rupees that are invested, in Point 2.
   
   Remember, when planning for your retirement you are planning the finances for a period of approximately 25 years of your life. Do give this goal the importance it deserves, plan and invest carefully and properly.
   
   For a personalized Retirement Planning solution, please do Contact Us –our team of Investment Consultants will be happy to help you.

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