Don’t Just Retire, Retire Rich. Here’s How
Retire Rich: No matter how healthy or fit you may be, there’ll be one day when you can longer work or earn as easily as you earn today. As the law of nature, old age and consequent retirement is something that there’s no escape from for any person.
However, that phase of retired life can be a very happy period and the time to enjoy your life completely, or alternatively live sparingly due to financial constraints. How your retirement phase will unfold for you has a lot to do with the decisions that you make in the present day.Retiring as completely financially independent and rich is a sum total of making some wise choices. Here are some actionable tips on retiring rich:
Priorities Savings from An Early Age
Most people feel that young age is the time to spend money and enjoy life. However, the wise feel that it is also the best time to start saving for retirement.
As you grow older, your income does increase. While that is true, so do your expenses rise with your increasing family size, growing up children and so on. If you make only spending a lifestyle habit, saving that time can get neglected or even missed. And if you continue with this pattern for too long, you might get yourself into a retirement phase full of drudgery with being forced to compromise against your lifestyle.
Avoid Unnecessary Debt
Today, you might be young with a lot of ambition to grow. This might compel you to take up debt and invest in avenues of work that appear lucrative. Alternately, you might feel tempted to take loans and invest in large capital assets with the vision of growth in your capital.
However, you must be extremely cautious in terms of taking such loans and avoid them unless necessary. This is because there can never be guaranteed returns from investing in any avenue. If the circumstances don’t unfold as planned, you could get into a spiral that chews on all your savings for retirement.
Invest in A Way That You’re Equipped to Fight Inflation
Having a good quantum of savings is not enough. It is important to allocate those savings effectively so that they grow and grow over above the future inflation rate.
If you invest young, you have a long time period to take advantage of in terms of the opportunity to make steep returns and benefit with subsequent compounding. In that case, the asset class that you shouldn’t miss out on at all is equity.
That’s because,over time, equity investments pay the steepest returns as compared to debt or the seemingly safer investments. The equity form that you choose could be either stocks or mutual funds, depending on your understanding and involvement with the market.
You might feel tempted to shy away from equity due to the fear of being exposed to volatility risks. However, if you invest regularly, in a systematic manner, you can mitigate that market risk and earn an overall positive and steep return over time.
When the value of money falls, the limited returns might not actually grow your money effectively from your principal invested. Equity is what will help to take care of this.
If you go ahead with equity, you should ideally invest a fixed sum continually over a long period at fixed intervals, say every month. This way, you’ll be investing at both the times when the market is in a bullish and a bearish phase. Over time, when averaged out, your returns are going to be higher than when you try to time your market entry at any single point.
Another point to note here is,if you’re risk-averse,then large-cap investments might be safer than mid-caps because of their selection of companies. If you invest long-term in a SIP with exposure on large caps, you’ll be comparatively safer and can make handsome returns to take home by retirement.
Secure Yourself with Lucrative Insurance Plans
While equity is a good way to make a handsome return, the safety aspect and financial security of your family can be taken care of by allocating money to insurance plans.
You can plan out on investing in good pension plans that are designed to help you save specifically for retirement. During your working years, the premium payments can also benefit you with some tax advantages.
With pension plans, in case of your death within the policy period, your family is taken care of by the huge sum assured that the insurance company pays them. If you outlive the policy, you can claim the benefits with the due amount at maturity. In fact, if you explore you also have some great options in pension plans that allow equity exposure based on your age.
For instance, the Platinum Wealth Plan by Max Life Insurance offers a lot of investing options in terms of choice of funds based on risk appetite. It also provides you with the option of adding on a rider to your policy for your spouse, who can benefit with additional protection. HDFC Life’s Click 2 Retire is another good plan that comes with the advantage zero policy administration charges right from the start. Further, Bajaj Allianz’s Life Insurance Goal Assure plan offers ‘return’ of mortality charges at maturity with zero premium allocation charges. You can analyse the different insurance options available and pick the ones most closely aligning with your needs.