As opposed to the previous generation, retirement today is not about sitting back and being content with the monthly pension. Millennials right now are the only generation with the largest adult population, and they are strategically involved in retirement investment. As per studies, this generation is aged between 29 and 43 as of 2023, and they are more conscientious regarding retirement savings and investing than their parents.
Heavy debts, COVID-19, uncertainties in the economy, the great recession in 2008, the anticipated upcoming recession, etc., are the major worries that have stressed millennials financially and to enjoy a stable post-retirement life, many have started their investment for a retirement fund.
Discussed here are 5 simple steps to strategically build your retirement fund for a peaceful post-retirement life.
- Jot down your estimated expenditures
Jot down your expenditures in priority order. Despite an unsteady income, you can enjoy a peaceful post-retirement life in the manner you want to if you plan for it earlier. May it be your daughter’s destination wedding, a tour with your better half, owning an organic farm or a beach house, etc., you can prepare a corpus, not only for meeting monthly expenses but also for every luxury or goal. For this, you need to plan and begin investing early and focus on building a retirement corpus through investments such as equity mutual funds. Also, ensure to designate a timeline and budget for every financial goal and factor in the inflation aspect too while doing so.
- Form an adequate emergency fund
Do not allow any unplanned expenses to impact your financial stability. Before you start with your planning for post-retirement corpus accumulation and other life goals, ensure to prepare yourself for any uncertainty like job loss, medical emergencies, etc. Such unanticipated events may empty your long-term goals’ investment corpus including your corpus for retirement. So, it is very important to form a financial backup dedicated to such financial contingencies which may allow you to manage your financial stress with ease and not hamper your long-term goals’ investments.
- Invest in an equity fund for building a retirement corpus
Ensure to move away from the incorrect notion of investing in low-risk financial instruments. While sticking with low-risk instruments may safeguard your capital, it will not allow you to considerably grow your investments as per the estimated time frame. One of the main threats impacting your corpus for retirement is inflation and fixed-income assets cannot offer inflation-beating returns. Here’s where you must invest in mutual fund, particularly an equity fund as it has the potential to generate inflation-beating returns over the long term by a wide margin.
- Begin your retirement investment as early as possible
The faster you begin, the bigger the retirement corpus you will accumulate. Starting your investments early also allows your investments to make the most out of the power of compounding over a long time period. So, you must ensure to treat your retirement with the same level of importance as your short-term goals and begin investing at least small investible amounts in equity funds through SIPs (Systematic Investment Plans) towards this financial goal. Ensure to increase your investible amount towards retirement corpus creation with an increase in your income.
- Avoid using your retirement corpus for other goals
Avoid digging into your investment for retirement for any other financial requirements. A very common habit while switching employers is to withdraw a slight amount from retirement funds or provident funds instead of adding funds to them. Do not follow this practice as doing so would not allow you to create the required retirement corpus.
The steps discussed above can help you design an optimal strategy for retirement. With the above strategies, you can meet all your financial goals, including your retirement goal, and create an adequate emergency backup. No matter what age you are, whether you are in your early 20s or late 30s, now is the perfect time to begin with your retirement savings and investments. To put it simply, early planning and investing can assist you to accumulate an adequate retirement corpus owing to the power of compounding.