Have you calculated your expenses after retirement? This is important because you need to invest now based on your monthly expenses after retirement. You also have to consider the effect of inflation. The value of money will decrease due to inflation in the next 10–20 years. So, while planning your expenses for 25–30 years after retirement, make sure to keep inflation in mind.
The Value of Money Decreases with Time
If you want ₹50,000 every month after retirement, the main question is — how much should you save today? First, it is important to understand that ₹50,000 today will not have the same value after 20–30 years. If you want to spend ₹50,000 per month after retirement, your yearly expense will be ₹6 lakh.
Plan for 25–30 Years of Expenses After Retirement
Aparna Shankar, CIO (Equity) at Wealth Company Mutual Fund, said, “To manage ₹6 lakh per year after retirement, you need to build a fund that can take care of 25–30 years of expenses, adjusted for inflation.” If we assume a 7–8% return on your money after retirement and a 6% inflation rate, the real return will be only around 1.5–2%.
You Must Invest in a Disciplined Way
If we take the withdrawal rate as 3.5%, it means your retirement fund should be about ₹1.7 crore (₹6,00,000 ÷ 0.035). If you want to collect this amount in 20 years, you will need to invest regularly. You must invest ₹15,000–17,000 every month in equity mutual fund schemes. Also, invest a part of your money in debt funds.
Increase SIP Amount Every Year for Faster Growth
If you increase your SIP amount by 10% every year, you can reach your goal faster. You must use the right mix of investments. You can invest 70% of your money in equity and 30% in debt. As you come closer to retirement, move your money into low-risk funds. This will help protect your fund from market ups and downs.