Retirement planning tips for NRIs

Are you an NRI planning to live in India post-retirement? Wondering how and how much to save to live a peaceful and carefree retired life? Fluctuating interest rates, lower returns, increasing investment risks, increased life expectancy combined with growing health problems and cost of treatment have made retirement planning essential.

All you need for retirement planning is good foresight. If you’re young and are earning well, retirement may be the last thing on your mind. But the time to start planning your retirement is now. Whether you’ve just commenced working or you’re at the end of your career, make a comprehensive plan to achieve your retirement goals. It’s never too early or too late!

The right investment mix
If you’re in your mid or late twenties, you must invest about 60% of your income in higher risk instruments, such as equity-linked plans, pension plans or a SIP of a mutual fund with allocation proportionate to your risk appetite. Invest the rest in tax-saving schemes to derive dual advantage of tax benefits and healthy returns. In your mid-thirties you must have a balanced investment portfolio with about 30-40% exposure to equity and the rest in fixed-income instruments, since you still have over twenty years to retire. In your mid-forties and beyond, your investment mix must be 85% in instruments, such as Employees Provident Fund (EPF), Public Provident Fund (PPF), Post Office Monthly Income Scheme (POMIS) and National Savings Certificate (NSC), and the balance 15% in a pension plan or equity-linked mutual fund scheme. If you have surplus cash, consider investing a small amount in a Systematic Investment Plan (SIP) of a growth fund. Select the options that suit you aptly after carefully weighing the pros and cons.

Retired already?
If you’ve retired already and received a sizeable retirement corpus, invest wisely to generate a good cash flow for the next fifteen, twenty or twenty-five years. Inflation may erode your income from safe investments. Set aside an amount that you may need for regular expenses in the next 2 or 3 years as reserve, and invest in cash or short-term instruments. Invest about 20% - 30% of the corpus in stocks or equity-linked funds to outrun inflation. Invest the balance in bonds to beat interest rate fluctuations. Ladder your bond maturities such that about 10% of your bonds mature each year for the next 5 or 10 years.

Your portfolio must be diversified with a well-balanced mix of appropriate instruments suitable to your profile. The ”rule of 72”(it helps you figure out when your investment will double or halve), a fundamental rule of economics, can help you determine the compounding impact of your choice of savings options. Continuously monitor and churn your portfolio based on the changing external conditions and your needs.

Spend wisely and save early to continue the same lifestyle and live a happy and contented life post-retirement.


Source: Economic Times

Thanks and Regards,
Sanchari Sinha,
Intern at DENIP Consultants Pvt. Ltd.