5 Ways to Build a Substantial Retirement Corpus
Regardless of whether you just started a new career or you’re almost through, you still have the potential of building your nest egg. Ideally, the sooner you start saving for your retirement, the more money you could earn due to the power of compounding. But it’s never too late to begin. Let’s look at five pointers to help you boost your savings and follow your retirement dream.
1. Know how much you may need
Take the help of a retirement calculator, a handy online tool that gives you an instant snapshot of how much money you may need for your retirement. It can also help in identifying surpluses and gaps. To use an online retirement calculator, all you need to do is enter your current annual income, frequency, current retirement savings, current age and desired retirement age to see an approximate retirement amount. Ideally, consulting a financial advisor can be a massive help if you’re looking to build a customised financial plan for your retirement.
2. Begin today
If you’re new to saving for your retirement, start today with as much as possible to enable compound interest to work in your favour. The magic of compounding is the ability of your investments to generate earnings that are reinvested, which further generate their own returns. Hence, the earlier you start saving and investing, the more compounding works for your money. So even if it means starting to invest with a small amount, it can substantially impact your investment results if you have a long time horizon in view.
3. Automate your savings/investments
You’ve probably heard the saying “pay yourself first.” That means saving for yourself at the start of the month when you receive your income. Use a Systematic Investment Plan [SIP] in mutual funds when saving for your retirement. A SIP automatically deducts the amount from your savings account towards the desired fund of your choice. It allows you to potentially grow your nest egg without having to worry about it.
Additional read: How to accumulate Rs. 2 crores for your retirement
4. Control expenses
Take a thorough look at your budget and examine areas that show where your money is going. Look for places where you can minimise spending so that you have an additional amount to set aside for savings or investments. For instance, you may want to cut down on dining out and other discretionary expenses and forward those savings to contribute to your retirement fund, which in the long run can make a huge difference.
5. Identify new income sources
Your customised retirement plan must offer you a sustainable portfolio that provides you with a sufficient income stream in your retirement years. Look into all your retirement resources and estimate how long these assets will last based on your retirement budget, time horizon, and other considerations.
Some retirees often regret they’ve started too late and saved too little. But if you have time at hand, make an effort to start saving for retirement today and if needed, choose the right financial advisor in helping you see where you stand in your current retirement planning.
The first step to saving for your retirement is to recognise the need to put money away specifically for your long-term cause. With a precise retirement amount in mind, you will be able to find new ways to increase your contributions towards it.
When you work with your financial professional, they’ll help you decide correct asset allocation in stocks, mutual funds, cash equivalents, bonds, tangible assets and more. The right financial advisor will help you understand various combinations that can work for you, based on your threshold for risk and potential returns you need to meet your retirement goals.
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