"Timing" your investment for your retirement corpus which is 25 years away makes no sense.
1. One of the biggest challenges for tomorrow's retirees is to ensure that they don't outlive their savings, as you can borrow for other goals but no one will lend you for your retirement expenses.
2. This is a distinct possibility because of three factors: the rising cost of living, increased life expectancy and a very different retirement from that of the previous generation.
3. If you intend to retire at 60 years, you should accumulate a corpus equal to 25 times of your estimated annual expenses after retirement.
4. Suppose you estimate your annual expenses after retirement to be Rs.6 lakhs, your retirement corpus at the age of 60 should, therefore, be Rs.1.5 crores.
5. If you are 35 years old, you can easily reach this retirement corpus through monthly SIP of Rs.12,000 for 25 years in a top-rated Balanced equity fund with high 15/20-year returns (or even lesser time by increasing SIP amount).
6. Whenever you achieve this corpus, you can easily keep withdrawing 4% (or even 5%) from it, i.e. Rs.50,000-60,000 per month, through monthly SWP for meeting expenses during your entire retired life - while your corpus continues to grow too - even if you stop SIPs after retirement.
7. This also means that you can continue to maintain your today's lifestyle during your retirement too - just by being a disciplined SIP investor during your earning years.
8. During your earning years, you can even opt for SIP in a top-rated ELSS fund with high 10/15-yr returns, to avail an additional advantage of reaping Sec 80C tax benefits too, to the extent required each year.
9. As the 4%-5% withdrawal rule presupposes minimum annual returns of 7-8% and maximum inflation rate of 3%, these 2 mutual funds in your corpus would be able to maintain this differential easily whenever inflation rises.
10. If you would have other regular sources of income, say monthly rental income, or would have some amount in your retirement corpus, say EPF or NPS, you can even get by with investing lesser in this SIP fund during your earning years.
11. A balanced fund provides the "best of both worlds", i.e. equity and debt in a single fund, and in a ratio that is ideal for a relatively safer long-term investment for building your retirement corpus.
12. An ELSS fund is an "inflation-beating growth and tax-saving investment", with a largecap bias, ideal for long-term investors whose income is likely to be in the taxable bracket, while PPF is a "fixed income tax-savings instrument", which is insufficient for fighting long-term inflationary pressure which is essential with life expectancy on the rise.
13. You can invest around 5% of your asset allocation in international funds for portfolio diversification, although the growth prospects in a developing economy like ours gives better investment scope for creating a retirement corpus, an for this very reason, it is also very unlikely that index funds would outshine diversified equity funds.
14. There is no need to be overly concerned about expense ratios, which are capped under SEBI's directives, as long as you are a direct investor in top-rated mutual funds with a long-term history of outperformance among peers.
1. One of the biggest challenges for tomorrow's retirees is to ensure that they don't outlive their savings, as you can borrow for other goals but no one will lend you for your retirement expenses.
2. This is a distinct possibility because of three factors: the rising cost of living, increased life expectancy and a very different retirement from that of the previous generation.
3. If you intend to retire at 60 years, you should accumulate a corpus equal to 25 times of your estimated annual expenses after retirement.
4. Suppose you estimate your annual expenses after retirement to be Rs.6 lakhs, your retirement corpus at the age of 60 should, therefore, be Rs.1.5 crores.
5. If you are 35 years old, you can easily reach this retirement corpus through monthly SIP of Rs.12,000 for 25 years in a top-rated Balanced equity fund with high 15/20-year returns (or even lesser time by increasing SIP amount).
6. Whenever you achieve this corpus, you can easily keep withdrawing 4% (or even 5%) from it, i.e. Rs.50,000-60,000 per month, through monthly SWP for meeting expenses during your entire retired life - while your corpus continues to grow too - even if you stop SIPs after retirement.
7. This also means that you can continue to maintain your today's lifestyle during your retirement too - just by being a disciplined SIP investor during your earning years.
8. During your earning years, you can even opt for SIP in a top-rated ELSS fund with high 10/15-yr returns, to avail an additional advantage of reaping Sec 80C tax benefits too, to the extent required each year.
9. As the 4%-5% withdrawal rule presupposes minimum annual returns of 7-8% and maximum inflation rate of 3%, these 2 mutual funds in your corpus would be able to maintain this differential easily whenever inflation rises.
10. If you would have other regular sources of income, say monthly rental income, or would have some amount in your retirement corpus, say EPF or NPS, you can even get by with investing lesser in this SIP fund during your earning years.
11. A balanced fund provides the "best of both worlds", i.e. equity and debt in a single fund, and in a ratio that is ideal for a relatively safer long-term investment for building your retirement corpus.
12. An ELSS fund is an "inflation-beating growth and tax-saving investment", with a largecap bias, ideal for long-term investors whose income is likely to be in the taxable bracket, while PPF is a "fixed income tax-savings instrument", which is insufficient for fighting long-term inflationary pressure which is essential with life expectancy on the rise.
13. You can invest around 5% of your asset allocation in international funds for portfolio diversification, although the growth prospects in a developing economy like ours gives better investment scope for creating a retirement corpus, an for this very reason, it is also very unlikely that index funds would outshine diversified equity funds.
14. There is no need to be overly concerned about expense ratios, which are capped under SEBI's directives, as long as you are a direct investor in top-rated mutual funds with a long-term history of outperformance among peers.