Every person should create an emergency fund for 6 months of household expenses. Including EMI, if any.
Every person aspires to have money so that he can secure his future. To make life easier after retirement, today’s youth have started paying attention to retirement planning from the beginning. If you know how much amount you need for your retirement to maintain your current lifestyle.
For example, if you are 30 years old and your household expenses are Rs 50,000 per month i.e. Rs 6 lakh per annum, then to maintain the current lifestyle at the time of retirement, you would need Rs 2.16 lakh per month or Rs 25.93 lakh per annum . Here, an average inflation of 5 per cent has been assumed in 30 years. If inflation remains above 5 per cent, the amount required at the time of retirement will increase further.
To get Rs 25.93 lakh on your savings every year after retirement, you need to save around Rs 4.32 crore. Assuming that your retirement corpus will get 6 percent interest annually. To deposit this amount till retirement, you will need good planning and proper investment. Needless to say that the sooner you start the better.
where to invest
Generally, when it comes to accumulating funds for retirement, people want to put money in a safe place. They prefer to invest in risk-free and fixed interest investment options like Fixed Deposit (FD) or Public Provident Fund (PPF), which offer returns of up to 8 per cent.
But financial experts say that since retirement planning is for a longer period, investing in equities can yield better returns. This will help you to accumulate a huge corpus after retirement.
According to experts, diversified large cap mutual funds, multicap funds, which have the potential to give annual returns of up to 12 per cent over a long period, can be included in your portfolio. If you are afraid to make a full investment in equities, then you can invest in National Pension System (NPS) by taking 25:75 debt: equity exposure, which is capable of giving you around 10 per cent return per annum.
How to make 5 crore rupees fund
The amount you need to invest to build a corpus of Rs 5 crore will depend on the time you retire and the investment you choose. For example, if you are 25 years old and you want to retire at the age of 55, then you need to invest Rs 16.229 every month to build a corpus of Rs 5 crore in the next 30 years. Here the annual return is assumed to be 12 percent.
If you start planning after one year at the age of 26, then you will have to invest Rs 18,252 every month. If you start after 5 years then you have to invest Rs 29,374 every month.
Experts say that the sooner you start planning for retirement, the more you will benefit and the less financial burden will be on you.
Create emergency fund for 6 months
According to experts, every person should create an emergency fund for 6 months of household expenses. Including EMI, if any. The current COVID-19 pandemic has rendered many people jobless. That is why having an emergency fund is very important.
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