Often an ignored subject in the eyes of most young earning employees, retirement planning is an essential aspect of every individual’s life. It is a process of determining a financial plan for one’s future. You should focus on your retirement planning from an early stage of earning so that you remain worry-free and financially independent after your retirement.
You can begin by doing thorough research about the various retirement planning schemes that may be available to you and proceed by choosing the one that is most convenient for you. Before you do this, you can also use a retirement planning calculator which you can easily find online, to get a rough idea of what kind of scheme you should opt for.
Among the many consistent retirement planning schemes, Mutual Funds, are one of the most dependable plans that you will find to suit your retirement planning requirements.
In this article, we will learn why retirement planning is important and how investing in Mutual Funds is an excellent option in doing so.
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What is Retirement Planning?
Retirement planning is a process that proves significant to all working individuals. It is a matter of your future which deems it an important aspect of your life. Retirement planning is a process of strategizing to secure your financial assets by saving and investing your money to further sustain your life after you retire.
To explain it most simply, retirement planning refers to the preparation that you need to do for your future when your paid employment ends and you retire from your work. At this time, you can no longer depend on your monthly income which sustained you till then. Now, at such a time, not being able to depend on your monthly income will not come as a burden if you had previously planned and prepared for your retirement.
Strategically speaking, there are three stages through which one can plan for their retirement. The first stage comes during the early phase of your employment period. In this stage, you simply set aside and reserve some amount from your salary and save it for your retirement fund. After this comes the second stage where you need to think about making investments in certain beneficial schemes that will ensure returns on our payments and that amount will be saved for your future. The third and final stage, which is called the distribution phase by most retirement planners, comes near the end of your employment period. In this stage, there is no longer a need for you to make payments. At this stage, you can sit back and enjoy the returns on the payments that you made during the previous stages.
Why is retirement planning necessary?
Retirement planning is an important aspect of every working individual’s life. It helps in securing their future and addressing any/all financial adversities which may present itself in the future.
India largely being an un-pensioned society, it becomes even more crucial for employees to plan and prepare for a retirement fund and set aside finances for it.
What are Mutual Funds:
Earning returns on the investments that you make is one of the most significant aspects of wealth creation.
Mutual Funds such as Liquid Funds is an exceptionally popular investment scheme which allows investors to capitalise their finances and further earn interests on their payments. Investing in Mutual Funds lowers your risk of concentration because the fund manager controls this by spreading your investments across various instruments. This makes investing in Mutual Funds an even more attractive option.
What is the role of Mutual Funds in retirement plans?
For the employees of the Central Government, all retirement plans are already sorted by the government itself. But for people employed in the private sector or for those who are self-employed, it becomes crucial to plan for your retirement. Mutual Funds are one of the few investment schemes that allow you to defeat inflation.
Mutual Funds allow you to get acquainted with various asset-classes and subclasses which in turn help you achieve greater returns on your investments. Mutual Funds also allow you to get familiar with equity exposure. However, they help in securing risks by diversifying your investment portfolio.
Systematic Investment Plan:
Systematic Investment Plan is a systematic Mutual Fund investment scheme. It is better known as the SIP plan. Under this system of investment planning, you are allowed to choose the fixed amount that you wish to invest every month. This scheme helps you regulate your expenses and also invest regularly.
What are the advantages of planning your retirement with Mutual Funds?
There are several benefits to planning your retirement with the help of Mutual Funds.
- The flexibility of the Mutual Funds scheme is one of the main reasons behind choosing this scheme as they are more malleable than typical pension plans.
- Mutual Funds scheme is also beneficial in terms of tax-efficiency. This scheme is more tax-efficient than typical pension plans.
- Easy accessibility and transparency of the Mutual Funds scheme is another profitable attribute.
Retirement planning should be at the top of your list of priorities concerning finances. Many people don’t give the needed significance to retirement planning. However, it is an essential process which helps you secure your future in terms of financial stability. Retirement planning is crucial to any/every working individual who wishes to save money for the time after their retirement. You can find such a reliable retirement planning calculator easily available online.