Retirement Fund Need Bigger? So the ‘do’ of equity-debt investments changes with age and time; Valuable advice from Sheetal Deshpande

• Retirement Fund Need Bigger?
• So the ‘do’ of equity-debt investments changes with age and time
• Valuable advice from Sheetal Deshpande

Retirement Planning Investment Tips: Retirement planning is one of the most important aspects of financial security in life. This planning ensures financial security, stability and satisfaction in post-retirement life. After you retire from work, your regular income stops, but expenses continue, with medical needs adding more. If not properly planned, one may struggle to maintain the lifestyle, meet the essential expenses. Retirement planning helps you accumulate enough funds to meet these needs over time, allowing you to live your post-retirement life comfortably and independently without any financial constraints.

When investing for retirement, investments should grow at least in line with economic growth and inflation. Economic growth rate and ‘inflation rate’ should be considered while determining minimum return target. If your investments are growing at a slower rate than inflation, meeting your basic needs and reaching your retirement goals can become a hindrance. Therefore, your portfolio must have the right mix of equity and debt to achieve your retirement goals.

Equity means investing in the stock market through shares or equity mutual funds. Equity offers high growth or returns over the long term, but also carries risk due to market volatility. Debt includes fixed deposits, bonds, government savings schemes and debt mutual funds. Investment in debt offers stable and safe returns. It protects your capital and reduces portfolio volatility. Proper retirement planning offers a balance between growth and security with the best combination of equity and debt. Equity provides long-term growth, while debt protects against large financial losses. Asset creation and capital growth is assured if equity and debt balances vary according to different stages of life.

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An easy way to determine how much to invest in equity and debt based on age is to use age-based formulas, which will naturally reduce risk as you age. The most common rule is the ‘100 minus age’ formula. According to this formula, if you subtract your current age from 100, the number you get should be your investment in equity and the remaining amount should be invested in debt. For example, a 30-year-old should invest 70 percent in equity and 30 percent in debt.

You can take more risks if you are young, as you have enough time to recover from market fluctuations. So you can invest 70 to 80 percent in equity for long term growth. As retirement approaches, it is important to secure savings. So many people invest 50 percent or more in debt in their late 50s and early 60s to avoid big losses. A simple way to manage this change is to use a glide path, an age-shifting investment strategy that reduces the amount of equity and increases the amount of debt over time, helping to manage risk as you age.

Markets, income and your goals can change over time, making it necessary to review your portfolio annually. This helps match the mix of equity and debt to your risk tolerance, life stage and financial goals. Increasing life expectancy now necessitates larger retirement funds, making early planning, disciplined savings and a balanced investment approach imperative. Maintaining the right balance of security and growth can lead to a happy and fulfilling retirement life.

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