Retirement planning in 30s: Every rupee counts
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The 30s are all about completing life’s milestones. Buying a home, starting a family, a luxury international trip, or getting upskilled. These are just some goals that you may have. However, an often ignored savings component is retirement planning. It’s never too early to plan.
The sooner you start planning, the better it could be. That is because if you start saving in advance for a comfortable retirement, the total wealth accumulation would also be higher.
While setting aside funds for retirement, it could be beneficial to have investments across asset classes. This can help have a diversified corpus that is not subject to extreme volatility. For instance, investing only in equity-linked schemes could make your investments exposed to market fluctuations. Similarly, relying only on bond funds could increase the risks of interest rate hikes and drops.
Taking these factors into account, mutual funds, health insurance, and life insurance can be three primary instruments to save for retirement. If you need insights on how the markets will perform and the outlook on asset classes, Standard Chartered India’s Money Insights podcast can help you plan better.
The first step would be to make a list of your assets and liabilities. Assets could be property, gold, cash, and existing investments in debt and equity. Liabilities could be loans and tax payments.
Once you have the necessary information, it is helpful to ascertain which of these investments would last till retirement. For example, gold value typically appreciates with time, so this could be a beneficial investment for retirement expenses.
After deducting the liabilities, you need to calculate the funds needed after retirement. The funds would have to be adjusted against the rate of inflation. If this sounds complicated, the Standard Chartered retirement planning calculator could come in handy.
One factor to be considered is that your current monthly expenses would increase by two to three times by the age of 60 years. This is due to medical expenses and rising inflation rates.
Let’s take an example. Say your monthly expenses are Rs 50,000 at present. Even if you have accumulated Rs 10 lakh at the age of 30 years, an inflation rate of 10% could make these investments inadequate. You will need a corpus in excess of Rs 5.4 crore to meet your post-retirement expenses, considering the monthly expenses increase by 2.5X by then.
A mix of mutual funds and insurance could help achieve your wealth creation goals for retirement. These are some investment options:
There is a 30:30:30:10 rule that is often cited for retirement investments. Here, 30% is for your retirement expenses, 30% for inflation, 30% for the inheritance for your children, and 10% for emergencies. This could be tweaked based on your existing wealth corpus.
Over and above retirement investments, it is also beneficial to set aside at least six months of post-retirement monthly expenses for emergencies. A rule of thumb could be to look at your current monthly expenses and multiply them by 2.5-3. For example, if your monthly expense is Rs 60,000, you may need to accumulate at least Rs 10.8 lakh for post-retirement emergencies.
Saving an additional sum is always more advantageous than not having enough. Standard Chartered’s market insights could help you keep a track of the latest developments and plan accordingly.
Having a systematic and automated contribution mechanism can also help you save a fixed sum consistently every month. And as your salary increases periodically, it is useful to increase the investment quantum proportionately. Safer investments, with a mix of debt and equity, that offer sustained returns can sometimes be preferable over high-risk, high-return investments. Every rupee counts.
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Standard Chartered Bank, India having its principal place of business at Crescenzo Building C-38/C-39 G Block, Bandra Kurla Complex, Bandra (East), Mumbai – 400051 is a licensed Corporate Agent of ICICI Prudential Life Insurance Company Limited (IRDAI Reg No. 105) for life insurance products; Royal Sundaram General Insurance Co. Limited (IRDAI Reg No. 102) and ICICI Lombard General Insurance Company (IRDAI Reg No. 115) for general insurance products and Niva Bupa Health Insurance Company Limited (IRDAI Registration no. 145) for standalone health insurance products vide corporate agent number CA0028. All insurance products are underwritten by the respective insurance companies. Participation of Standard Chartered Bank clients in any insurance scheme is purely voluntary, and is not linked to the availment of any other banking products or services from the Bank. The benefits/ features of the products are indicative only. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding sale. Insurance is the subject matter of solicitation.