Planning for your retirement period guarantees that your retirement life shall not be short of funds. SIP or systematic investment plans are assured with which you can probably be successful to get hold of your retirement security.
Understanding SIP
SIP stands for systematic investment plan in mutual fund investments. This is a pre-agreed fixed amount of money paid at regular intervals of time. It helps one in rupee cost averaging, buying more units at a low price and fewer units when the prices are higher. It compounds to a whopping level in the long run.
Why Invest in SIP in Retirement Planning?
1.Disciplined Savings: SIP pushes the savings into your pocket on a particular date of each month, which then generates saving habit in the wallet.
2. Cost Averaging: The investment is time-consuming, which also implies that you reduce the damaging impact of market volatility.
3. Compounding Power: Whatever is invested is a fruit that generates its yields with further investments. It states that the earlier one makes investments and continues to add further investments, the profit increases more.
Ways to Plan Retirement through SIPs
1. Estimate Retirement Needs: You would have to decide what you wanted to do in retirement and at what age. Estimate your monthly retirement expenditure in real terms, with some inflation adjustment. It is often suggested that retirement should consume about 70-80% of the pre-retirement income.
2. Current Savings Analysis: What are the current savings and investments done through Provident Funds, National Pension Schemes, or any other sort of investment made. That’s an idea about the scenario.
3. Built-up Retirement Calculators calculate the amount one may need when he/ she is going to retire. He/she should not forget inflation since what looks sufficient now will not prove to be sufficient in 20 or 30 years.
4. Right Mutual Fund to be Selected: Mutually agreed mutual funds must go with the risk appetite of a customer. For a young person who is ready to take the risk, better returns are there if an equity fund is taken for investment. As an aged person about to retire, they must prefer debt funds.
5. How much should one sip every month?
One can calculate how much should be regularly invested each month to reach the desired corpus, using online SIP calculators. Of course, that needs to be in sync with regular income or other financial obligations.
6. SIP Portfolio Review: SIPs and mutual funds in your portfolio must be reviewed about the performance time to time. According to this, portfolio adjustments are then made based on the condition of the market and also your risk appetite.
7. Stick to it: You never look for an excuse to get out of SIPs even during the downward motion of the market at every given point in time. A person can hence indulge oneself with being absolutely rich over time.
Advantages of SIP in Retirement Planning
You can start with a small amount and increase as and when you feel you are better placed.
Usually very simple to be done online.
Conclusion
SIP-based retirement planning is pretty simple and effective in building up the wealth over time. If one begins early, invests regularly, and makes all the right decisions, he really builds a very robust financial base for his retired life. Let the power of SIPs work for you; be proactive in securing your financial future.