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Everything You Need to Know About Retirement Planning
Smart Retirement Planning Tips
- Start early - even ₹5,000/month at 25 can build a massive corpus
- Factor in 6-7% inflation for accurate planning
- Consider healthcare costs separately - they rise faster than inflation
- Diversify investments across equity, debt, and gold
- Review and increase SIP annually with salary hikes
- Don't forget to account for post-retirement goals like travel
- Build an emergency fund separate from retirement corpus
- Consider tax-efficient instruments like PPF, NPS for corpus building
How Retirement Planning Works
Step 1: Assess Current Status Calculate your current age, income, expenses, and existing savings to understand your starting point.
Step 2: Project Future Needs Estimate post-retirement expenses considering inflation. Healthcare and lifestyle costs typically increase.
Step 3: Calculate Corpus Determine the total amount needed at retirement to maintain your desired lifestyle.
Retirement Corpus Formula:
Corpus = Annual Expenses × [(1 - (1 + Real Return)^-Years) / Real Return]
Where Real Return = (Returns - Inflation) / (1 + Inflation)
Step 4: Plan Investments Calculate monthly SIP needed to achieve target corpus through systematic investing.
Frequently Asked Questions
At what age should I start retirement planning?
The ideal time is in your 20s when you start earning. Starting early gives you the power of compounding. Even a 5-year delay can reduce your corpus by 30-40%. However, it's never too late to start.
How much corpus is enough for retirement?
A general rule is 25-30 times your annual expenses at retirement. If you need ₹50,000/month (₹6 lakhs/year) at retirement, aim for ₹1.5-1.8 crores. This varies based on lifestyle, health, and longevity.
Should I consider inflation in retirement planning?
Absolutely! Inflation is the biggest wealth eroder. At 6% inflation, expenses double every 12 years. Always factor in 6-7% inflation for realistic planning. Medical inflation can be even higher at 10-12%.
Which investments are best for retirement?
Diversify across equity mutual funds (for growth), debt funds (for stability), PPF/NPS (for tax benefits), and gold (as hedge). Early years: 70% equity, 30% debt. Closer to retirement: reduce equity to 40-50%.
How do I account for post-retirement income?
Include rental income, pension, interest from FDs, and dividend income. However, be conservative - assume only 50-70% of expected rental income and don't rely entirely on market-linked returns.
What about healthcare costs in retirement?
Healthcare costs rise faster than general inflation. Budget separately for health insurance (₹50,000-1,00,000/year) and create a medical emergency fund of ₹10-15 lakhs apart from retirement corpus.
Complete Retirement Planning Guide
Everything you need to know about retirement planning in India
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