Post retirement, people don’t generate a regular income. Therefore, it’s important to set aside some funds for old age while you’re still earning.
When you’re in your fifties, you have little time to save for yourself and your dependents. But with focused investment planning, you can make the best of the time you have left in your active working life.
If you’ve just entered your fifties, and if you assume your retirement age is 60, you have just under 10 years to boost your retirement fund.
If you had started investing for retirement in your 20s or 30s, you would have had more investment options to explore then. But in your 50s, your options are fewer.
Additional Reading: 5 Post-retirement Dos And Don’ts
Nevertheless, here are a few ways you can build a decent-sized retirement corpus.
Step 1: Grab That Calculator
First things first, calculate your retirement fund needs. Let’s say you are 50. You plan to retire at 60. Your life expectancy is 75. Your current monthly expenses are Rs. 40,000.
You expect the average rate of inflation to be 6%. Therefore, these figures mean that your monthly expenses at age 60 will have grown to Rs. 71,600. By your 75th year, your monthly expenses will be Rs. 1,71,600. Therefore, your retirement fund needs to be sufficient to meet your expenses, taking inflation into account.
Step 2: Pour In All In
Let’s say you haven’t had a chance to start building a retirement fund yet. In your fifties, you would have likely attended to several of your life responsibilities such as funding your children’s education, buying a home, or car, and so on.
Therefore, you should now start pouring more of your savings into your retirement fund in order to achieve the right-sized corpus. You must carefully pick the right investment tools in order to optimise returns, risks, and tax incidence on your retirement fund. This will help you reach your corpus target in an optimum manner.
Step 3: Stay Invested
You have a minimum of a 10-year investment horizon. In which case, you should invest in equity in a controlled manner. This should help you cover some lost ground by providing above-average returns. You can remain invested in equity for the long term, and make withdrawals in a calibrated manner for your income needs.
Remaining invested over the long term will neutralise the effects of market volatility and assure you the best possible market-linked returns. Think Mutual Funds and NPS, apart from direct equity.
Step 4: Withdraw Not
Make sure you don’t make any withdrawals from your EPF and PPF. These instruments are meant to fulfill your basic needs in your sunset years. As such, they also provide great returns over the long term.
Step 5: Cover Yourself
Consider having an independent health policy, if you have been depending on your employer’s health cover. Once you no longer have a regular income, treatment for a single illness could erode your retirement savings. Buying Health Insurance at this point would be economic and it would cover pre-existing diseases after the required waiting period.
Not having started on a retirement fund is no calamity. But you mustn’t waste time and get to it without any further delay in order to secure your golden years and enjoy a trouble-free retirement.