Plan Your Retirement with Mutual Funds

Plan Your Retirement with Mutual Funds

By Akhil Chugh

Date April 30, 2023

Purchasing a luxury car or a new home, taking a trip around the world, and planning for your child’s education are all financial goals. So is retirement. But the difference between retirement and the rest of the goals is that retirement is not an option. You may not purchase a luxury car, or you might inherit a home, you might even not want an international trip, and your child could opt for a small, inexpensive wedding – all of these goals have alternate scenarios. But retirement is an eventuality that you will have to face as your life progresses. Thus, retirement planning should ideally be the foremost priority while designing your financial plan. However, retirement planning is the most ignored among the young working population because most people feel that retirement is far away. Once they get near the retirement age, many people realised that they have not saved enough to live an independent comfortable retirement life.

It is very important to realize that the normal working life of any individual is till 60 years and assuming a life expectancy of 80 years, there is no income for the rest of the life. Therefore, we need to create a sufficient retirement corpus to last for these 20-25 years to live a stress-free retirement life and make the most out of it.

Planning for retirement must begin as early as possible. Even a small start can help an investor accumulate a large corpus of wealth in the long run. You’ll be pleasantly surprised when you see the power of compounding work its magic and multiply your investments over a period of time.

Retirement Planning with mutual funds

Steps to Plan a Secured Retirement:

Planning for retirement is crucial. Here are 8 simple steps to plan for a secure and comfortable retirement with the help of mutual funds.

1. Start Early:

Retirement planning should ideally start from the day you start earning to reap the maximum benefit of compounding.

We usually delay retirement planning, because we follow an order of goals. For example, buying a car at 25 years of age is more important, owning a house at 35 years of age is more important than retirement planning & so on.

However, the best choice for any early retirement plan is to begin investing in your early 20s. By doing this, you can accumulate a higher amount of corpus with a small amount of monthly investments. Starting retirement planning early gives you an edge as with a longer investment horizon, the compound interest in your investments increases exponentially. This is the power of compounding.

To help put things into perspective, here is a little representation of the impact of delaying investing.

Retirement Planning with mutual funds

As evident from the above illustration, if you start 10 years late then you will have to make a monthly SIP contribution of more than 3x amount to achieve the same retirement assuming 12% CAGR in equity mutual funds. That is the cost of delaying and the magic of compounding!

Thus, starting early is crucial in retirement planning.

2. Rent vs Buy a Home:

Owning a home during retirement is very important. It provides security and saves you from heavy monthly rent which rises over a period of time due to rising inflation. Also, real estate is an asset that, in the long term, is expected to appreciate in value.

3. Health Insurance:

The recent Covid pandemic has shown us how a disease can make things uncertain and play  havoc on our expenses. With the ever-rising cases of diseases and a sharp rise in healthcare costs, any medical emergency could be crippling to your finances if not planned well. It can make a big hole in your retirement kitty. Thus, health insurance is a necessity. It is ideal to buy medical insurance when you are young as premiums are low and coverage is high.

Get in touch with us at to learn more about available Health Insurance plans.

4. Know your Retirement Age:

The number of years you have to build your wealth and the funds required for your retirement is dependent on your retirement date. Though the majority of people retire at the age of 60, but some want to retire early which means building a higher retirement kitty to finance your retirement life. Thus, understand your retirement age and invest accordingly.

5. Consider Inflation:

The cost of living is continuously increasing with rising inflation. By the time you will reach your retirement age, you will need more money each month to sustain the current standard of living. This rising inflation needs to be taken into account while deciding your target retirement corpus.

6. Investment Portfolio – Know Where to Invest?

What should your retirement portfolio consist of? If you have a long-term investment horizon i.e., more than 10 years to retire, investing in equity funds is a good option as it is an asset class that has the ability to beat inflation and provide high returns over a longer time horizon. If you are closer to retirement, it is advisable to invest in hybrid funds (a combination of debt and equity where debt forms a major component of your portfolio).

7. Opt for the SIP route:
Retirement Planning with mutual funds

SIP is a disciplined form of investing allowing you to invest money into a mutual fund scheme periodically, such as daily, weekly, monthly, quarterly, or half-yearly, etc. Every time you invest money, additional units of the mutual fund scheme are brought at the market rate and added to your account. Thus, you keep buying units at different rates – more units when the market is low & fewer units when the market is high – helping investors to benefit from rupee cost averaging as well as the power of compounding. SIP or Systematic Investment Plan offered by mutual funds is an ideal and disciplined way of investing over a long period of time. It is not only an easier and more disciplined mode of investing but also lets experts manage your investment.

8. Never Touch Your Retirement Fund to Finance Other Goals:

Never withdraw funds from your retirement corpus, before you have retired, irrespective of the financial emergency as you cannot avail of any loan from any source to fund your retirement life.

Net Brokers Takeaways:

  • A small amount invested for a long time period would fetch better returns than a one-time investment. It’s always better to start early to unlock the power of compounding to accumulate the desired retirement corpus.
  • Have different plans for different goals such as retirement, child’s marriage, child’s education, etc. Never use funds that are intended for some specific purpose, when you need money.
  • Start your retirement planning as early as possible via monthly SIPs in equity mutual funds. Equity mutual funds give returns that beat inflation over the long term and can help you accumulate a substantial retirement corpus to fulfil your retirement dreams.
  • Invest regularly & increase your investments every year with rising income via SIP top-ups.

Post-retirement life requires you to have a stable source of income to be able to continue your existing lifestyle. With the help of the right financial planning, you can easily plan for a secure and comfortable future. Get in touch with us today to learn more about how you can successfully plan your retirement.

Download our mutual fund app & start investing for your long-term financial goals.     

Happy retirement planning!