Life is uncertain and the beauty lies in overcoming the challenges it throws at us. It is the ‘what if’ and ‘how much’ which keep us moving forward, take risks or being prepared. But the bigger question is how much is too much or merely enough for survival?

When we start our career in our early or mid 20s, retirement seems to be too far a reality. Instead of taking small steps toward accumulating a retirement corpus, most of us focus on accomplishing other goals.

The bell rings in our mid 30s and early 40s when we see people around us like someone with whom we have worked for many years or our mentors, retire. The next 20 to 25 years is actually not small duration to accumulate a substantial wealth for retirement. But the problem is by this time we already have much of responsibilities like taking care of a family, paying EMIs, kids education etc. Also, we would have developed a lifestyle from which we can’t backtrack.

Fear factor sets in and our mind is boggled with questions like what if I am not able to accumulate enough wealth before retirement? What if I run out of money? What if I don’t have any source of income after I retire? Or what if I am forced to take an early retirement?So how much money should we set aside in order enjoy a peaceful retired life?  Or when is the right time to start?

These are all relative questions but the best way to deal with it- is to start early and let the power of compounding do its job. That way we can remain prepared for the worst. Only thing one needs to keep in mind is the rate of growing inflation rate, which is an even bigger worry when we don’t have a source of income. 

As per financial analysts, with current rate of inflation, one’s monthly expenses are going to triple in the next 20 years to 25 years if he or she wants to maintain the same standard of living. Therefore, we should start keeping aside at least 10% from the very beginning and continue till we retire.  In fact, it is even better if we start setting aside a bigger amount when our income increases substantially. This is the best plan per se.

If one is little late there is no reason to get to hyper, but has to take a disciplined approach.

Retirement planning is a long-term process. Both fixed-income products and market-linked investments play a crucial role for such purposes. While market-linked investments help to generate high real return in the long-term, the fixed income investments help in capital preservation to meet the desired goal.

Now, important question is what should be our investment proportion in equity and debt? Most financial analysts suggest, our investment in equities should be 100 – our age. For example, if one’s age is 35, then his/her exposure to equities should be 65%. He/she should review it every five years and keep changing the proportion accordingly. This way helps in reducing risk profile as one start nearing their retirement.

Apart from wealth accumulation, one should also take adequate health cover for the entire family. Today, medical inflation is even higher than the average inflation rate and a medical emergency can break one’s bank balance in a hard way. A proper health cover will come handy in such a situation.

Uncertainties can strike any time. Yes, you can lose your job or forced to take an early retirement. Given the power of AI, ML or Big Data revolution, the chances of such uncertainties are getting higher every day. However, if your investments are on the proper track, it will ensure that you never run out of money. And who knows, early retirement can actually open new doors for you.