For most of us, the thought of retiring rich and early has crossed our minds more than once. Whether you wish to pursue your passion, travel the world, start your venture or simply enjoy life, a lot many people are keen on the idea of early retirement. Is it possible? Absolutely! All it requires is the right financial planning and discipline to follow it until the very end.
Here, we look at how we can save for retirement early to lead financially independent lives.
Start saving more
It is a given that early retirement planning involves saving money. But how much should you save for your retirement without compromising your lifestyle? A thumb rule is to save approximately 15% or more of your earnings towards retirement. But, if you are looking for a prosperous and comfortable retirement, saving over 20% of your monthly paycheque can get you closer to building your corpus amount sooner. Plus, it could ensure adequate funds for emergencies.
Get disciplined about saving
Saving must be a regular habit and not a one-off financial decision. For starters, you could set up an auto-debit facility in your salary account and open a new savings account. Through this, a portion of your income automatically gets transferred to your new savings account every month. You can make all your investments from the new account. Besides, you may not be tempted to spend the money since they are not lying in your salary account.
Where to invest?
With a separate savings account for investments, you can consider investing in mutual funds. Mutual fund investments are regarded as excellent investment vehicles to grow your money in the long run. They are known to fetch high returns superior to traditional forms of investment such as fixed deposits, savings account and more.
Begin with a Systematic Investment Plan (SIP) to invest in mutual funds. It not only helps in building financial discipline, but you also get to enjoy the benefits of compounding. Another merit of investing through SIPs is the rupee cost averaging, which automatically allows you to buy more units when the market is down.
Picking the right funds
The mutual fund world offers a wide variety of funds to invest in. Take your time to study the returns, risks and performance of the mutual funds of your choice and align them with your investment profile. Typically, a strong portfolio must consist of multi-cap schemes and large-cap schemes to create an adequate retirement corpus. The risk exposure could be relatively higher in multi-cap plans. Still, they are considered to offer rewarding returns that could beat inflation, especially if you have a long investment horizon.
Conclusion
Start saving regularly to provide for a comfortable and financially secure retirement period. Get started with SIPs and invest in mutual funds for long-term horizons to reap the maximum benefits.
Stay updated with all the insights.
Navigate news, 1 email day.
Subscribe to Qrius
