Today, a retirement period is no longer about age. It can be about your financial sustainability in the future. To sustain financially after retirement, you should accumulate enough resources before the flow of your regular income stops. However, you should first understand what your finances can look like after retirement before you begin to accumulate wealth:
After you retire, your expenses can revolve around funding your child’s education, meeting your routine household expenses, such as groceries, utility bills, rent payments, and so on. Apart from your regular expenses, you might also have to fulfil your travel or medical expenses, whichever arises at that point of time in your life.
Since the flow of your professional income stops after retirement, there can be a significant drop in your resources. Moreover, your risk appetite can decrease after you grow older, which is why you might not be able to invest in capital markets. Due to a reduction in your income and risk tolerance, you should have an adequate corpus to safeguard your future. Hence, you should opt for investment tools that can provide fixed retirement income, such as Fixed Deposit (FD), Senior Citizens Savings Scheme (SCSS), Annuity Plan, and so on.
During your on-going retirement period, it can be crucial to consider the impact of inflation on your retirement corpus. If you generate a corpus without taking inflation into account, your money might not be able to suffice your post-retirement needs in the next 15 years. Therefore, it is crucial to calculate the current inflation rate before you begin to accumulate funds for your retirement.
Once you calculate the inflation rate, you should start the accumulation of wealth for your retirement period. While doing so, let’s take a look at the following steps you should know to generate the retirement corpus for a comfortable future:
- Calculate the retirement corpus
To calculate the retirement corpus, consider your monthly expenses as well as your post-retirement expenses. It can be crucial to keep the routine expenses in mind since it can change after you adjust the inflation rate in the calculation. As an aspiring retiree, you can use a retirement calculator online to determine the number of resources that you might require for your retirement period.
- Consider risks
Many of you might still have a high-risk appetite even during your retirement period. When there is an asset to fall back on you, the risk appetite can be high. As a risk-taker, you can segregate your corpus into long term and short term.
- Avoid a single rate of return
If you want to build a substantial corpus, you should avoid assuming a single rate of return for your whole corpus. It can be imperative to divide your entire accumulated corpus into separate proportions for different durations. A long duration can ensure you get to allocate your funds in high-return gaining investment tools. With high returns, you can meet your monthly expenses with minimal retirement corpus.
To sum up, you should begin planning early before you reach the retirement age. Early retirement planning can allow you to save more money for your financial security in the future. Moreover, you can choose the right retirement investment plan that can double your retirement savings. With adequate funds, you can meet your post-retirement goals, such as traveling, pursuing an interesting hobby, etc. as well as live a stress-free retirement period.