The Key Is Retaining Buying Power In Your Retirement Years

Neha Mehta, 38, email

I am a single mother to a 6-year-old child. I have savings of around Rs 20 lakh, but most of it is in low-risk and low-return instruments, such as bank fixed deposits (FDs). I worry I may have lost valuable time to invest in equities. Is it too late to shift to such wealth-building assets for a better future for us? How can I rebalance my portfolio without taking on excessive risk?

You still have a significant amount of time to build wealth if you invest in a disciplined way over the next 22 years, until the age of 60, assuming that is your retirement age. There are several mutual fund options, including moderate-risk funds, that can help you build a substantial corpus.

It is advisable that you consult a certified financial planner who can assess your risk appetite, investment horizon, and financial situation, and design a suitable investment plan to help you achieve your family’s financial goals.

Suhel Chander CFP®, Handholding Financials

Nandini Barua, 36, email

I took a career break for a few years, but I am back at work now. However, I feel I lag behind my peers financially. I have limited savings and have missed out on early investments. How can I effectively catch up with my peers without overextending myself?

At 36, you still have a solid 24 years before retirement, assuming that you will retire at age 60. Financial journeys are deeply personal. Comparing yourself with peers is neither useful nor fair, as everyone has different life goals and circumstances. What matters now is creating a clear plan and following it with discipline.

Start by defining your life goals, and divide them into short term (1-3 years), medium term (4-7 years), and long term (8-10 years and beyond). Quantify each goal in today’s money and adjust for inflation to estimate future needs.

For instance, if your current monthly expenses are around Rs 25,000, at 8 per cent inflation they could rise to about Rs 1.6 lakh in 24 years. To retire comfortably, you will likely need a corpus of around Rs 3.15 crore, which may require a disciplined systematic investment plan (SIP) of about Rs 13,000 per month now.

It is equally important for you to create a realistic budget; track all expenses, including half-yearly and annual commitments. Categorise them into needs, wants, and desires. This will help you align your spending with priorities and ensure there is sufficient allocation towards your investments.

Once your goals are clear, invest with purpose. Channel surplus money into suitable instruments based on your risk profile and time horizon. Use mutual funds or other market-linked options for long-term growth. Stay consistent with your SIPs and review their progress annually.

Hina Shah CFP® Luhem²Wealth

Rajiv Desai, 52, email

I will retire in about 10 years. I have assets of around Rs 50 lakh, but I am not confident that it will be enough for me. Should I focus more on aggressive growth to catch up or shift to preserving what I have? How do I strike the right balance between risk and security?

The last 7-8 years of your pre-retirement working life provide you with one of the last opportunities to invest at relatively lower prices, which can potentially appreciate well during your retirement years.

The more you allocate to fixed-income investments such as bonds and FDs, the higher the chance of running out of money in a rising cost environment due to inflation.

That is why it’s important to invest in equity and hybrid mutual funds (MFs), as they can provide growth and help maintain your purchasing power in your retirement years. It would be prudent to maintain a mix of fixed-income assets like FDs for emergency requirements, and hybrid MFs for long-term wealth creation and protection against inflation.

You can invest in a mix of aggressive funds and moderately aggressive hybrid funds, which will help you strike the right balance between risk and security. The key is not in preserving your existing capital, but in maintaining your purchasing power in your retirement.

Suhel Chander, CFP® Handholding Financials.