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A retirement plan for someone in the late 30s

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Last Updated: Dec 18, 2019, 03.08 PM IST
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Could you please help me with my retirement planning? I am planning to start investing for my retirement. I am in my late 30s. What are the options I have and how much should I invest?

-Varun Paranjpe

Here are some pointers you can use for your retirement planning. Since you have not offered any personal details, it is not possible to offer you a personalised advice. You must consult a financial planner or registered investment advisor if you need more clarity.

First, we assume that you have an emergency fund, health insurance, and life insurance in place. If no, take care of these things first.

Next, make a list of your assets and liabilities. Chalk out a plan to repay expensive loans as soon as possible. Look at the list of assets that can be useful for your retirement.

Make a list of financial goals, both the short and long term. Find out the cost of achieving those goals. (you can find out the current cost, inflate them by the rate of inflation for every year to reach a realistic target. Once you know the target corpus, you can find out how much you need to invest every month to achieve them.

As a rule, stick to safer options like debt mutual funds and bank deposits to take care of your short-term goals. For long-term goals, you should always try to invest in equity mutual fund schemes that are in line with your risk profile.

For example, you may choose large cap mutual funds to create your retirement corpus if you a conservative investor. If you are a moderate investor, you may choose multi cap schemes. Aggressive investors can choose mid cap and small cap scheme to create their retirement corpus.

Keep track of the performance of your schemes. Always review your portfolio at least once or twice a year. If a scheme is underperforming for more than a year or two, you should consider selling your investments in it and move to a better performer in the same category.

Take the money out of your equity mutual funds at least two to three years before your retirement and move the money you need in the next five years to to safer options like bank deposits, government-sponsored schemes, or debt mutual funds. This is to ensure that a sudden volatility in the stock market does not upset your retirement.

After retirement, you should assess your situation and take call on your investments. You should continue to invest in equity only if you have a very large corpus to take care of your living expenses and have a large risk appetite. And of course, a long investment horizon.

(If you have any mutual fund queries, message us on ET Mutual Funds on Facebook. We will get it answered by our panel of experts.)

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