In today’s times, considering the rising inflation, a retirement fund of Rs 1 crore is not considered sufficient. Now most people are setting a target of Rs 2 crore. But to reach this goal, long-term planning, discipline and right investment strategy are very important.
Why is it important to understand inflation
According to experts, if inflation remains at an average of 5% annually, then the value of today’s Rs 2 crore will reduce significantly after 20 years. In such a situation, to maintain the same standard of living, more than Rs 5 crore may be required in future. Therefore, ignoring inflation in retirement planning can be a big mistake.
Benefits of SIP and compounding
SIP (Systematic Investment Plan) is considered a good option for regular investment. If a person invests around ₹35,000 every month for 20 years and increases it by 10% every year, he can create a corpus of Rs 2 crore. If the investment period is made 25 or 30 years, then the monthly investment amount has to be reduced and the benefit of compounding is more.
How to avoid market risk
Fluctuations in the stock market can affect the retirement fund. In a recent example, the market fell by about 12%, which could reduce a portfolio of Rs 2 crore to about Rs 1.77 crore. To avoid such risks, investors should change their strategy with time.
Adopt glide path and bucket strategy
Glide Path: Gradually reduce equity investments and shift to safer options before retirement
Bucket Strategy: Liquid fund for 03 years expenses
- Debt or hybrid fund for 37 years
- Equity investment for more than 7 years
This strategy does not allow regular expenses to be affected even when the market falls.
what mistakes to avoid
- Stopping SIP when the market falls
- Taking low returns by choosing only safe investments
- ignore inflation
Creating a retirement fund of Rs 2 crore is not difficult, but it requires time, patience and proper planning. This goal can be easily achieved by regular investment, increasing SIP and creating a balanced portfolio.