Nowadays, many people have become serious about their retirement, and they do not even want to wait till 60 years. If you are 45 years old and you want to retire at the age of 55, then this dream can turn into reality. For this, you have to make a strong financial plan. Investment done at the right time, control over expenses, and savings plan play an important role in achieving this goal. This plan of yours will completely depend on your current lifestyle and future needs.
How much money will be needed for retirement
There is no fixed formula to calculate the amount required for retirement. It depends on many things:
Your monthly need today
What kind of life do you want to live after retirement, and what are your monthly expenses today?
Inflation
The most important thing is that you keep inflation in mind. If your monthly expenses today are ₹50,000, you will need around ₹90,000 every month to maintain the same lifestyle after 10 years (if inflation is 6% per annum).
Age after retirement
For how many years will you depend on retirement money? Suppose you retire at the age of 55 and expect to live till 80, then you need to create a fund for 25 years of expenses.
According to an estimate, if your monthly expenses today are ₹50,000, then taking inflation into account, at the age of 55, you may need a retirement fund of at least ₹3.5 to ₹4 crore.
5 effective ways to create a fund in 10 years
Invest more, save more
If you have only 10 years for retirement, you need to save and invest a large part of your income (at least 30%). For this, you may have to cut down on your unnecessary expenses.
Focus on investing in equity
Invest money in equity-related investments like mutual funds to get higher returns in the long term. SIP is one of the best options, in which you invest a fixed amount every month. As your income increases, you can also increase your SIP amount by 5-10% every year. This will help in increasing your funds faster.
Create a balanced portfolio
Don’t depend only on equity. To balance your portfolio, also invest some money in safe schemes like debt funds, PPF, or NPS. As you get closer to retirement, you can gradually convert your equity investments into debt to avoid market risk.
Pay off all loans early
Before retiring, ensure that you do not have any major loans (like a home loan or car loan). Loan EMIs reduce your savings, so it is very important to repay them on time.
Keep reviewing your plan
Every year, review your financial position, investment performance, and market fluctuations. Also, change your plan as per the need. If the market is performing well, you can achieve your goal quickly.