Retirement planning directly refers to allocation of savings into funds or assets to meet the monetary requirement during retired life without any hassle. As you grow older the health issues increase and medical costs go up. A smart retirement plan has a mixture of both fixed assets such as Fixed Deposits, Real Estate etc. and investment in Equities, SIPs etc.
Let’s take an example of a doctor who starts to invest for his retirement at the age of 35 after fulfilling his family requirements. He decides to invest for 25 years till the age of 60 to secure his next 25 years after retirement. If current monthly requirement is 25,000 then with about 5.5% inflation, the monthly requirement would be ~52,000 after 25 years. By investing about 20,000 a month makes the total 60Lakhs till the target of 60 years. For an average of 8% interest the total pay-out narrows down to 40,000 a month. Since income grows along with inflation, topping the premium by 1,000 to 2,000 annually makes him achieve the target easily. (For illustrative purpose only)
Hence, retirement planning enables individuals to consolidate their savings for future use and helps them enjoy an independent retired life.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.