How to save for retirement?

This is the most important question in perhaps everyone’s life. Agreed? There are a plethora of secure and time-tested investment ideas that you can rely on to create a good corpus before your retirement and lead a peaceful time in your golden years. You should obviously have some part of your portfolio allocated for investments which are completely risk-free, i.e. bank fixed deposits which are regarded as the safest and most viable investment plans for retirement. If you have any lump sum savings, allocate a part of that into an FD and if you have a tax-saver FD then even better since it will be locked in for 5 years and you can earn a handsome amount at maturity. You will be unable to withdraw the FD during this period but the tax benefits will more than make up for it.

Have some investments allocated for PPF as well. This is often considered as one of the best retirement plans by investors. PPF investments come with 15-year lock-in periods although the interest earned and the amount withdrawn at maturity are completely tax-free. Through disciplined investments in PPF, FDs and post office monthly savings schemes, you can definitely save a good amount in the future. Of course, experts also advise that in order to beat inflation, you should invest in mutual funds through SIPs (systematic investment plans). Investing in equity mutual funds/stocks will help you get tax benefits along with gaining good returns over a long period of time. Remember to stay invested for the long haul and scale up monthly SIPs steadily with increases in your income. Another safe investment will be the National Pension Scheme (NPS) of the Central Government and inflation-linked Government bonds which are good options for building up a retirement corpus.

Creative ways to grow wealth for retirement

In this context, you may consider investing in mutual funds with the help of some online investment platform, say, Mutual funds to build wealth innovatively over the long haul. How is this possible? You can simply invest smaller amounts in SIPs for mutual fund schemes available online, reap the benefits of good returns and hold onto investments over diverse market cycles in order to build a good corpus for retirement. Also, you can check out other funds like the SBI blue chip fund and other popular mutual fund plans that are available for you to invest in. Have approximately 15-20% of your portfolio (if not more) in mutual funds through your SIPs. Have these auto-debited from your account every month to really build up your savings. This will take care of your needs for accumulating a retirement corpus while you consolidate your more secure investments like FDs, NPS, PPF and bonds.

Now, you may consider allocating a part of your corpus to invest in real estate. Sounds crazy right? It is not as difficult as you think although you require proper market research to execute this plan perfectly. Do these things only after you have secured your basic investments in SIPs and fixed-income safe instruments guaranteed by the Government. Research on the best residential/commercial property that you can afford to buy. You may consider taking a home loan for part of the amount, making the remainder of the down payment with your accumulated savings. The loan will give you additional tax benefits (assuming that you have repaid off your existing home loan for your primary residence/property) which will help you save a considerable amount in taxes every year.

Additionally, once you get possession of the real estate unit in question, do your due diligence and rent it out to a suitable tenant for earning handsome income every month. This amount can be used to offset your monthly EMI while any surplus can be re-invested in mutual funds and other investment avenues. Later on, the value of the property will appreciate while the rental income will be a steady income source post retirement.

Some other ways to creatively build up a sizable retirement corpus include accelerating your savings. Set yourself a target, i.e. save 10-15% of the money that you anyway spend every month. Put this into an investment avenue like a recurring deposit, keep compounding the interest and renewing the investment at the end of each tenure cycle. This will help you build up sizable wealth for retirement if you follow this strategy for a few years. Check out ULIP (unit linked investment plans) as well. Gold is a good investment, provided you are okay with the non-liquid nature of this asset. You may invest now in gold and steadily build up your gold investments before you sell them off for a fair profit down the line. In this way, you can tap resources like real estate, gold, SIPs in mutual funds, stock/share investments and of course, FDs/PPF/NPS and the like for building up a hefty retirement corpus.

Best way to save for retirement – core take-away

Creatively investing your money is a plus point since it will help you find newer sources of earnings/returns where none existed previously. Weigh your share/stock investments carefully. Do your research and if you are in it for the long haul, try and purchase shares of companies directly, particularly ones that you believe in and have confidence in. If the company is reliable, has a good track record and hits the bull’s eye over the next decade or so, it may lead to unprecedented wealth generation for you at the time of retirement.

Another creative way to invest is through startups. If you have a decent amount to invest and have higher risk tolerance, consider taking professional advice and investing in startups or emerging companies which are gaining ground rapidly in the highly competitive Indian market. If you place your bets wisely, then you will have backed a winner that can give you sizable investment growth in the long term. A lot depends on your own risk-taking ability and surplus funds that you can deploy across comparatively riskier avenues.