If you have just hit the 30s, you will find your priorities changing with an increase in income and more responsibilities coming your way. With increased responsibility and income, you would like to secure the future of your spouse and children. So, if you haven’t started planning for your future yet, you must start doing it at the earliest.
At this age, people often think that they have a long road ahead and that they have the luxury to give way to temptations. However, the sooner you chart your short, medium and long terms goals and start making investments, the bigger the corpus will be in the future. You would need a significant amount to live out your retirement days without financial woes, hence, you must start saving early. It’s easier to save up with a regular income.
Delaying to build a retirement corpus now would imply taking high risk to attain the required corpus, curtailing the targeted corpus or even delaying the age of retirement. If retirement planning features in your financial plan, here is how you can begin.
Assess Your Income And Expenses To Calculate The Amount You Can Spare For Retirement
Before you start planning, assess your monthly income and outgo to understand how much you can contribute towards retirement planning. Chalk out a budget to keep your spending within control. You can start small as you have time in your hand. However, make sure you invest regularly in a disciplined manner. You can step up your investment once your affordability increases.
Choose The Right Investment Option
In the 30s, you must pick aggressive investment instruments for your portfolio. Equity-oriented Mutual Funds are a good option for you. Equity Mutual Funds fetch high returns if invested over a longer period of time. The inherent market risk and volatility reduces when you stay invested over a considerable amount of time.
When choosing Equity Mutual Funds, you can go for Systematic Investment Plans (SIPs). SIPs let you invest in small and affordable amounts every month and ensures a regular amount for investing. It also gives you the benefit of rupee cost averaging, thus maximum returns while ironing out the market volatility. If you are risk-averse, you can choose Fixed Deposit schemes. However, the returns would be relatively low.
Be Regular And Disciplined
Retirement planning needs a lot of discipline over a period of time. Avoid unnecessary spending and borrowing, and stick to regular and wise investing. One way of doing it is by locking away your savings at the beginning of the month. You can set standing instructions with your bank to transfer a certain amount from your salary account to the savings account.
Keep Your Retirement Funds Earmarked
A common mistake that investors make is to draw money from retirement funds in case of a financial emergency. This can leave a deep dent in your portfolio. Earmark a corpus exclusively for retirement. As tempted as you might be, don’t withdraw from it.
In your 30s, you have the flexibility to choose your course of life. A delay in kicking off your investments can spoil your retirement corpus.
(The writer is CEO, BankBazaar.com)