Retirement Planning : A lot of long-term investors have hit their SIP investment goals. They’ve bought homes, finished their kids’ education, and built a solid retirement fund. Now, retirement is just around the corner, which means they need to start optimizing those funds.
Don’t make the mistake of pulling out all your cash
Many investors take out all their money as soon as they hit their investment target. That’s not the right move. “If someone has been investing through SIPs for several years and their financial goal is met or nearly met, they should have a careful withdrawal strategy in place,” says Saurabh Agarwal, Chief Business Officer (New Business) at Angel One.
Set aside some cash for emergencies
The first thing to do is stop the SIP, not to withdraw everything. Before anything else, investors should create a 6-12 month emergency fund. This can be kept in a liquid fund or a savings account. It’ll give you peace of mind.
Consider a Systematic Withdrawal Plan
Instead of taking out all your money at once, think about using a Systematic Withdrawal Plan (SWP). SWP lets investors take out fixed amounts regularly. This helps reduce the risks of market timing and spreads out capital gains tax. If you don’t need the cash right away, consider pulling money from high-risk equity funds and putting it into short-term debt funds or fixed deposits. Just remember to think about exit loads and capital gains tax when planning your withdrawals.
No returns close to retirement, securing your money is key
If an investor has built a corpus of Rs 1 to Rs 5 crore (around $10 million) by age 55 and plans to retire at 60, they need to keep a few things in mind. They should focus on saving money, earning average returns, and tax savings instead of chasing aggressive growth. A smart move is to invest enough for the next five years in low-risk, highly liquid short-term debt funds or fixed deposits.
