Saving money for the autumn of your life is something many of us do as soon as we start earning.
As we know, wise investments are the way forward to achieving a financially stable retirement life.
There are several factors which one must be take care of such as not focusing on a single product or creating a ‘retirement specific portfolio’. For that, one should have clarity on factors like one’s age and year of retirement as well as the financial responsibilities to be expected around then.
Moreover, if you are the sole breadwinner of your family, you must ensure your spouse’s financial independence in case of your absence.
Naming a nominee for each of your investment and writing a will would bring a transparency to your financial dealings.
Ensure the following things in your life to enjoy a smooth retirement life.
- Get a Health Insurance
Make health insurance a mandatory part of your financial plan as old age is vulnerable to diseases. As taking a new scheme post retirement will not be easier, having one in kitty prior to it will be useful.
- Emergency Fund
Ensure that you have an emergency fund in liquified form- be it in the form of savings account or liquified mutual fund. Your emergency fund should be your monthly expenses for twelve months.
Open a PF or NPS (National Pension System) account and keep investing in it. This fund should specifically be kept aside for retirement.
- A Perfect Portfolio of Debt and Equity
The equity portion in retirement funds must be reduced considerably giving way to liquified funds and debts. Invest 75% of the funds in debts and the remaining 25% in equity which means you don’t get impacted by the market fluctuations. But, if 50% of your funds is sufficient to meet your post retirement requirements, keep the remaining in equity. The funds in debt ensure a stable income while the one in equity leads to wealth creation.
- Choose NCD’ s (Non-convertible Debentures) or Debts
Investing in NCD’s ensures returns at a specified interest rate. This will be a good regular source of income.
- Direct Equity
If you invest in direct equity, you will get good dividend at the rate of 1% or 2%. Considering the present scenario, the maximum you yield from a rented house is less than 2%. So, buying the shares of reputed companies with retirement in mind will generate a good corpus amount by the time you wish to retire.
- Real Estate – Rental income
Even when inflation is on high, rental income is something which gets affected the least. So, invest in real estate especially on rental income as it ensures stable returns.
- Annuity Products
Annuity products are those which you pay for 7 or 10 years after which you get pension or annuity. These are effective retirement products and several effective annuity schemes are available.
- Follow your Passion
In case you have any hobby or passion, retirement is the best time to pursue them. You can keep yourself energised as well as generate an income out of it.
This should be the general portfolio of someone who is planning a retirement. Allocate the funds in such a way that it provides stable returns as well as ensures wealth creation.