Retirement Planning

All in all, retirement planning is a long process. The earlier it is started, the better it is. When you are young, your risk-taking capacity is high, which allows you to earn a higher rate of return. This is the time when you can start building a corpus for life after retirement.

Save 10% of your income for retirement If you have a regular job, then 12% of your basic salary and an equal contribution by your employer that flows into your Provident Fund account. The 10% rule is crucial for self-employed professionals and others who are not covered by the EPF umbrella.

Increase investment as your income grows Give periodic boosters to your saving whenever you get a windfall, such as a tax refund or a lump- sum payment in the form of, say, an annual bonus. The trick is to commit yourself to save more in the future.

Don't dip into corpus before you retire Dipping into the corpus before you retire prevents your money to gain from the power of compounding.

Withdraw 5% a year initially, then step up To ensure that you don't run out of money in your old age, you must have a drawdown plan in place. The thumb rule is not to withdraw more than 5% of the corpus in the first five years of retirement.

Save 20 times your annual expenses This rule is different from others because it is based on how much you spend, not on how much your investments earn. Knowing your post- retirement expenses is crucial to retirement planning.