Astonishingly, 67% of retirees work to earn bread and butter and other statistics show that 7 out of 10 adults are dependent on their children after retirement. Time for millennials to take this seriously.

According to the 2011 census, there are 104 million people over the age of 60, which is expected to increase to 176 million by the end of 2026. Being financially independent is now a days due to the increasing nuclear families. We are joining smaller families and moving from cities to cities or metros for better opportunities. To add to this, our children may go abroad for their own betterment, leaving us high and dry at the time of our retirement. The health and social securities for the Indian market are well known to us. The pandemic and global warming have shown us the possibilities of uncertainties in one’s life. Also, advances in medical science have proven to be influential in increasing life expectancy. Just imagine, spending a nice odd 20-30 years without a stable source of income or a retirement corpus to rely on! Three common scenarios for retirement:

• dependent on child
• work for yourself
• make money work for you

Well if you are smart enough to select the third option then continue reading.

Money works for you!

Sir Newton said that the power of compounding is the eighth wonder of the world. Many of us know but rarely do we understand or experience its importance. The key here is – invest long term and let it grow for at least 20-30 years. Invest as if you will need it only when you cross 60. With the right asset allocation and investment plans, one can not only retire well but leave a legacy behind. There are ways to secure your money as well as develop it to fund yourself later.

Importance of asset allocation and investment planning

Start early for better growth with the power of compounding. There are ways to generate passive income and retirement corpus but the right ratio of risk to the right asset class plays an important role. It is time to rethink our traditional investment avenues – FD, Gold, PPF etc. due to inflation and dwindling % returns.

FDs and PPF were suitable instruments to invest all your money for huge returns of 10-12% p.a. The rate of return is declining year-on-year and is close to 5-7% and is likely to decline further. Furthermore, the stock market may be by far the most attractive option, but not all investments can be trusted. Your capital can be whipped in the form of an accident. So never invest in the same asset class. Diversify your portfolio according to your risk appetite and retirement years. As a simple thumb rule you can consider the ‘rule of 4’. Invest at least 4% of your income for your retirement every year till you retire.

A substantial amount can be collected during your working period of 25-30 years. Inflation is a major factor to consider for retirement planning. Check out the image below to get a glimpse of it at 6% p.a.

Capital appreciation requires investments to beat inflation. Gold was considered as a hedge against inflation. But if you analyze returns over a decade, it has been volatile and hardly outpacing it.

Ideas are personal: Writer Darshit Shah is co-founder of Leader Care from Ahmedabad

Disclaimer: The views expressed are those of the author and are personal. TAML may or may not subscribe to it. The views expressed in this article/video are in no way intended to predict or time the markets. The views expressed are for informational purposes only and do not imply any investment, legal or taxation advice. Any action taken by you based on the information contained herein is your sole responsibility and Tata Asset Management will not be liable in any way for the consequences of such action by you.

Mutual fund investments are subject to market risks, read all the documents related to the scheme carefully.

Disclaimer: Content Produced by Tata Asset Management