Education Series | March 28, 2017
What exactly do you see when you envision your retirement? You and your loved ones are on a holiday; you are indulging in hobbies which you did not get the time for during your work life or simply pinching pennies to pay the bills? If not the last one you want, then start planning for your retirement now. Here are a few smart ways to retire rich, in case you wonder how.
Live a frugal life: Haven’t you heard the saying “who has seen the future, my friend?" This sounds more appropriate in regards to the post-retirement life. So, try and live a frugal life at your early age so that you can have a considerable amount of money in your bank account after your retirement. According to the recent research, although India ranks highest on the Retirement Readiness Index, only 18% of the population indulges in investing and saving money for post-retirement life. This means that people in India spend more than they save for future. It is advisable that you take a look at your credit card statement every month and find out expenses which you can easily avoid. Try to invest that money in savings for a better financial future.
Start saving early: Do you think it’s too early to save money for the future? Then let us remind you that ideally, you should start saving as soon as you start earning. Thanks to the power of compound interest since a small contribution to your retirement account can grow to a sizeable amount over time. So, the earlier you start saving, the more you can save within a definite period of time.
Save minimum 10% of your annual income: The thumb rule of retirement planning is easy to follow and that is, save at least 10% of your annual income. If you have a regular job, then 12% of your basic salary and the same amount by the employer will be contributed to your Employee Provident Fund. This is the best savings option as it contributes 12% of your monthly income to the retirement savings plan and it is totally unavoidable. If you start saving at an age of 25, then your savings in the first five years should account for 44% of your total corpus when you are 60 years old. If you start later, say at an age of about 40 to 45 then you should invest 20-25% of your income for having a comfortable retirement life. 10% of the income is the minimum amount you should save if you are a self-employed.
Diversify your investments: Again, haven’t you heard the saying “do not keep all the apples in one basket?” Likewise, you should not invest all your money under one savings plan. Distribute your money in different financial instruments like stock, mutual fund, insurance, real estate and public provident fund in order to generate a risk-adjusted return. According to the recent research, some 35 lakh new investors have invested in mutual funds in the first eight months of 2015 to 2016. While these investments will help you to save tax, they will aid you to build necessary wealth for the post-retirement life.
Invest in National Pension Scheme: As the name suggests, pension plan provides you with financial security and stability during your post-retirement age when you do not have a regular source of income. It ensures that you live with pride without compromising the standard of living and depending on your heirs financially. Initially, National Pension Scheme (NPS) was launched by the Government on 1st January, 2004 with the objective of inculcating the habit of saving for retirement among all the citizens. Both Government and Corporate employees can invest in NPS and avail the retirement facility. All you have to do is choose any one of the Pension Fund Managers (PFMs) available under “All Citizen Model” and also the percentage in which the funds are allocated to various classes.
The major benefit of investing in National Pension Scheme is a tax-free investment. Finance Minister Arun Jaitley announced an additional tax deduction of Rs. 50,000 for those investing in NPS under the section 80CCD (1B). To promote this ideal way of investment and encourage people to plan for their retirement lives, a premium brokerage firm and financial institution to their investors for helping them to achieve the financial wellbeing. So, contact this reputed brokerage firm and invest in NPS through them.