Things to look out for while planning for retirement

If you have been planning for retirement, you need to make sure that the retirement corpus will be adequate enough to meet your post-retirement needs. More importantly, your retirement corpus has to be safe and secure and should not be exposed to the risk of capital erosion. So how do you make sure that the retirement corpus is adequate and safe. Let’s find out.

First, to build up an adequate retirement corpus, you need to put in your money in investments that offer inflation-beating returns. Since inflation erodes the value of your investments, it is imperative that the returns on your investments should be higher than the rate of inflation. So, if the average inflation is, say, 5% per year, the average returns on your investments should be in the rage of 7-8% per year.

Investments in equities offer returns of more than 10% over the long term, so your retirement plan must include equities in the portfolio. Also, equity-based investments such as equity mutual funds too offer attractive returns and investing in these funds will help you enhance the overall returns on your portfolio. More importantly, if you start early in life, you would have built up adequate corpus to make sure that your pension income is sufficient enough for you to lead the life you are accustomed to even after retirement. 

However, when you are approaching retirement age, you need to reduce your equity exposure to protect your portfolio from volatility in the stock market and shift your investments towards and debt and debt-related investments such as bank fixed deposits, bonds, debentures, National Savings Certificates, Kisan Vikas Patra, etc. This will ensure safety and security of your investments over the long term.