Heres How You Can Ensure A Dream Retirement



Hemant Rustagi
Chief Executive Officer, Wiseinvest Advisors


Retirement is an important goal and hence it should be given its due in your investment process. However, despite realizing the importance of this goal, many of us end up ignoring it either by compromising on returns or by not planning investments properly. Then, there are those who commit the mistake of withdrawing amounts during the accumulation stage itself. While at times it may be necessary to do so, making it a habit can negatively affect your retired life.

Therefore, one must keep focus on this important goal at all times and follow certain basic principles as well as show willingness to improve returns during the accumulation phase. Here is what can help you build the corpus required for a dream retirement.

Assess your asset allocation: Asset allocation is an important aspect while investing to achieve different goals over varying time horizons, including retirement planning. Asset allocation is important because it determines the level of risk and the potential to earn returns from your portfolio. Investing without asset allocation could either result in making your retirement portfolio too aggressive or too conservative. In the accumulation phase, the focus should be on investing in an asset class like equity that has the potential to beat inflation over time. Of course, the proportion holds the key from risk and reward point of view.

Make smart money moves: The smart money moves will involve budgeting and looking beyond traditional investment instruments like FDs and small saving schemes and real estate to give yourself a chance to accumulate more and earn positive real rate of return, i.e. gross returns minus taxes and inflation. While there are attendant risks of investing in market-linked products offered by mutual funds, you can mitigate them by following an asset allocation strategy and investing on a regular basis. Once your reach closer to your retirement age, it would be prudent to rebalance the portfolio in a phased manner to make it fit for income generation and growth after retirement.

Physical vs financial assets: Some of the key factors to ensure investment success are liquidity, tax efficiency and diversification. Real estate does not provide most of these. For example, the rental yields are very low and the lack of liquidity is a major issue for real estate investment. In other words, relying heavily on real estate can also make you compromise on the potential to generate the required regular income.

It is a proven fact that financial assets, if chosen well, have the potential to do better than real estate on all these counts. Considering that you may require varied amount of regular income at different stages of your post-retirement period, investing in financial assets like equity and debt through an efficient investment vehicle like mutual funds can be a much better option. Mutual funds provide a number of options that allow investors to generate tax-efficient regular income and also make money grow at a healthy rate. Besides, mutual funds are diversified by nature and offer strategies like Systematic Withdrawal Plan (SWP) to generate regular income without any uncertainty.

Focus on tax-efficient options: Tax-efficiency of return can make a huge difference to what you get to keep out of growth and income generated through your portfolio. Hence, it is always advisable to opt for tax-efficient investment options. Mutual funds offer options that allow you to save taxes at the time of making investment as well as earn tax-efficient returns.

The notables are ELSS and retirement funds that are eligible for tax savings under Section 80 C. In fact, retirement funds allow you to choose different asset mixes suitable for the period at your disposal to build your retirement kitty as well as offer options to generate regular income during disbursal stage.

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