Retirement is a stage where most people desire to lead a calm and stress free lifestyle. But having a decent retirement corpus is equally essential so that you can enjoy your post retirement life without bearing any financial burden.

How to invest for retirement?

How much money one may require for their retirement life may solely depend on who you are what your needs are. There are several factors that come into picture when planning for retirement, including one’s life expectancy, risk tolerance, alternate income (if any), etc. Everyone looks at retirement from a different perspective you too, depending on your needs and requirements should decide how much and where to invest. Irrespective of what your needs are, there are some typical guidelines which all investors should try and abide by while picking investments. For example, they need to be extra careful while picking schemes as they near their retirement stage. Retirement is a phase when you will withdrawing more from your life’s savings more than adding to the corpus. You may have already added a pension scheme, or a PPF (Public Provident Fund) in your investment portfolio, and shall keep these investments in mind before further investing.

If you keep these standard pointers in mind, they might help you in evenly balancing out your retirement investments. Considering all your existing investments before further investing for may also aid investors in charting out a smart investment strategy. Hence, it is necessary to plan early so that you can have enough time to build a decent corpus for your sunset years.

Can mutual funds help me in planning my retirement?

If you have a long term investment horizon, you can consider investing in mutual funds for retirement planning. Yes, there are some risks involved with mutual fund investments, but then, no kind of investment is considered to be a safe investment. Mutual funds can prove to be one of the investment tools, which may benefit investors if they invest for the long run. But investments made in mutual funds should ideally align with an investor’s risk appetite along with his/her investment horizon, their existing liabilities and their ultimate financial goal.

Are you building a retirement corpus, or you already have that planned out and are investing for your child’s overseas education, or do you wish to buy a weekend home for your second innings? Having a clear goal might help you select a scheme that shares its investment objective with yours. That’s because there are a lot of investment schemes available and picking one without having a clear goal might not be a good idea.

SIP: A systematic approach for your retirement planning

If you have a long investment horizon for retirement planning, you can consider investing in mutual funds through SIP. Systematic Investment Plan or SIP is a systematic approach through which investors can continue to invest in mutual funds in a disciplined manner. With SIP, all an investor has to do is instruct his or her bank, and every month on a predefined date a fixed amount will be deducted from the investor’s bank account and transferred to the scheme invested. Another great thing about SIP is that one can start investing with an amount as low as Rs. 500 per month and can gradually increase this amount (though not obligated by the scheme) as per their requirement or need. Investing in mutual funds through SIP can also help investors benefit from rupee cost averaging and the power of compounding.

Let’s take an example to help you further understand how you can benefit from SIP

Gopal is a 30-year-old photojournalist who as recently started a monthly SIP of Rs. 10,000/-. Hypothetically, his investments are able to fetch him returns worth are 12% p.a. (just an approximate figure). If Gopal continues to invest Rs. 10,000 for a period of 30 years with average returns worth 12 per cent per annum, by the time he is 60-years-old and about to retire, his regular SIP investments in mutual funds will help him accumulate a retirement corpus worth of Rs. 3.5 crores (approximate).

Chances of any other investments tools fetching such returns with moderate risk are very low.

Investors, however, are requested to bear in mind that mutual fund investments are subject to market risks and returns from them are never guaranteed. Hence, they should first identify their risk appetite and invest only within their boundaries. Do not get overwhelmed by a scheme’s temporary performance and invest beyond your risk appetite. It is easy to get carried away, but remember that you are planning for your retirement, a phase where you’ll needing more money than you need now.

If you are planning to invest in mutual funds for building a decent corpus for post-retirement life, the early you start, the better it is.