Many of you reading this post have likely seen your regular lives upended by the pandemic these past few years. Health scares, expensive medical bills, job loss and financial hardships are some of the many challenges the pandemic has caused. Such extraordinary times often require you to review your financial health. In fact, this is the time to re-evaluate past choices, and this has been made easier with the plethora of online investing options available today. However, you must be careful while chalking out a financial plan.
When drawing up a financial plan, a large majority often overlook retirement planning. A carefully prepared retirement plan gives you the power to determine when you want to retire, rather than having to work through your retirement years to make ends meet.
But, in this volatile investment climate against a backdrop of easing interest rates and elevated inflation, what are some factors to consider when planning your retirement corpus?
Here are 6 factors to consider when planning your retirement:
- If you’re a potential investor at the start of your professional journey, time is your friend when planning your retirement. Even if you can only afford small investments, it is easier to accomplish your desired corpus over long.
- Investment is different from savings. Savings alone won’t help achieve pre-retirement financial freedom owing to various factors, including inflation. It is crucial to invest in instruments that can provide returns that can beat inflation.
Never depend on a single income. Make an investment to create a second source.Warren Buffett
- Consistency is crucial if you want to be financially independent at retirement. Small but regular investments are encouraged over significant but erratic investments over a small time frame.
- Your financial risk appetite can, in large parts, be a reflection of your temperament. Financial Wisdom, meanwhile, suggests if you’re early on in your investment journey, you can afford a higher appetite for risk and opt for more conservative instruments as you inch closer to retirement.
- When looking at achieving financial freedom before retirement, the focus should be on wealth creation. You can invest in share market. It certainly carries a higher risk than debt market instruments but also offers better returns over a longer time frame. This helps tide over volatile markets conditions.
- Diversification is key to a sound financial portfolio. No single investment avenue, be it equity, debt or gold, to name a few, can offer consistent returns. And though varying in intensity, each of these instruments can be volatile depending on prevalent market conditions.
The option of online investing and a wealth of personal finance literature freely available for consumption has helped take away the fear and awe that new investors often associate with financial planning. Usually, retirement planning takes a hit when more immediate financial needs call for one’s attention. But, despite these short-term goals, such as purchasing a car or house, marriage, or children’s education, achieving financial freedom before retirement is possible. The key to achieving all of your financial goals is living within your means, making investments consistently and re-evaluating your financial portfolio on a regular basis.
You can also read about the investment strategies of Warren Buffett & Charlier Munger to take the correct investment decisions.