When it comes to building a retirement kitty to enjoy a stress-free life post retirement, one must ensure that their planning is concrete as usually a significant sum of money is involved. To manage such money, one needs expert guidance. You must prepare yourself and your retirement fund to the best of your abilities so that you do not need to comprise on your desires and needs post retirement. Efficient planning and management will also mean that one does not need to compromise on their set standard of living even during retirement when the salary or income stops to flow. Even retired people with no liabilities must have a financial plan to course through their financial journey in a seamless manner. Let’s look at some common and important financial goals such as emergency fund, vacation planning, and wealth creation that one needs to cater to during their retirement.
Emergency corpus – To efficiently and effectively build an emergency corpus, experts advise investors to set aside their six to twelve months’ of their living expenses. In retirement, as your medical costs and other unexpected expenses might go up, it’s a good idea to have a healthy emergency corpus. You can invest this amount in funds with high liquidity such as liquid funds or debt funds that provide you with much-need liquidity and also helps you earn inflation-beating returns, ensuring that the value of your money does not erode away.
Wealth creation – Experts often refrain retired investors or investors nearing retirement to invest all their assets or even a majority of their assets in equities and equity-related securities. So, how does one build their portfolio and ensure capital appreciation? As there are no big and important financial goals left to cater to, there’s no point in investing in extremely risky investment options. If you choose to invest in equity funds, you must consider investing in large-cap equity funds rather small-cap equity funds that are comparatively more risky. Even if you do not have any dependents and have sufficient pension income, there is no point of investing in extra risky investment options to barely earn extra 2-3% returns on mutual fund investments per annum for a short duration.
Asset allocation strategy
A good asset allocation strategy would be to invest in a mix of equity mutual funds and debt funds. If you do not wish to hold too many investments, you might consider investing in hybrid mutual funds or balanced funds that invest in more than one asset classes. The allocation to each asset class would be dependent on several factors such as financial goals, risk profile, and investment horizon. A good asset allocation would be dedicating up to 30% of your assets towards equities and equity related securities, and allotting the rest to fixed-income securities. It is a good idea to periodically track and manage your mutual fund investments at regular intervals. Planning for your retirement well in advance will help you to hang your boots in style and live a comfortable and stress-free life post retirement. Happy investing!