Can mutual funds be the answer to your retirement planning woes?

2 Mins read

Retirement planning is the most important step of financial planning. But the problem with young investors is that they do not think about retirement when they are at the peak of their career. They feel that it is unimportant to think about retirement planning when they are young and should only focus on that when they are near the age of retirement. But in reality, this is an absolutely horrible idea. If you see, retirement is a phase when most of us will be living on a fixed budget. Our main source of income, which is our monthly salary will no longer be credited to our savings account. If your company has a pension scheme, you will have to live off your pension. If you haven’t withdrawn your employee provident fund (EPF), you will have some corpus. But is it going to be enough for you to sustain your golden years.

The cost of healthcare is on the rise and these medical expenses are only going to get more expensive in future. If you haven’t invested in a feasible healthcare plan, trust us, you aren’t prepared to tackle life’s exigencies. With old age comes rising medical costs and this is why one should aim at building a wealthy corpus to secure their golden years. But if you want to build a retirement corpus that is anywhere close to Rs. 40 lakhs to Rs. 50 lakhs, you need to remain invested for at least 20 to 30 years.

So now you know why we were saying that one needs to start planning for retirement at an early stage in your life? Depending on your investment horizon, risk appetite and investment objective, investors should invest in a retirement scheme that holds the potential to help them get closer to their ultimate financial goal.

Mutual funds for building a retirement corpus?

Mutual funds are a pool of professionally managed funds that invest across various asset classes. Mutual funds invest in various money market instruments like equity, debt, ETF, index, hybrid, gold, PSU and solution oriented. Retirement funds come under solution oriented funds as they aim to provide solutions to your investor’s retirement woes. Investors, depending on their risk appetite can choose from aggressive, conservative or dynamic retirement mutual schemes to meet their investment objectives.

Investors should always discuss with their partners about their retirement goals so that they are both on the same page.  If shouldn’t be life you are investing to go on a world tour once you retire but your better half wants to buy a home near countryside and lead a quiet peaceful life. In fact, you can actual achieve both these goals is you start investing in mutual funds specifically for retirement at an early stage in your life. If you do not have a large surplus to begin investing do not worry. Thanks to an innovative tool like SIP, investors can now invest small amounts at regular intervals till their investment objective is achieved.

A Systematic Investment Plan or SIP is a simple and convenient way to invest in retirement funds. With SIP one can invest a small fixed amount on a monthly basis, as long as this minimum investment amount fits the scheme’s requirement. You can even modify your SIP amount if you feel like increasing the monthly investment amount. SIP may inculcate the discipline of regular investing, something which is vital for achieving long term goals like building a retirement corpus.

So yes, mutual funds are the answer to your retirement planning woes, but it is up to investors to start investing as soon as possible so that they are able to get closer to their ultimate financial goal.