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5 Tips to Live a Financially Independent Retired Life

5 Tips to Live a Financially Independent Retired Life
July 29
09:51 2020

The notion of retirement is considered to be both complex and alluring. It is that period in life when you want to enjoy yourself, spend time with loved ones, in good health, and with ample resources available to fulfill your dreams. If you are in your 20s or 30s, you need to wait for over a few decades to reach the retired life and experience it differently. However, it also means you have enough time left to plan for it.

The retirement planning process often takes time and effort. At times, you may find it to be overwhelming. But ultimately, it will make achieving your retirement goals easier along with maintaining a lifestyle free from financial worries. You can also take help from financial advisors like FinEdge to invest right as a part of retirement planning.

Here are a few tips to make retirement planning easier for you:

Explore VariousInvestment Options

An important aspect of retirement planning is investing money in the right instruments that can help you build wealth over time. There are several investment options that you can opt for in this scenario, such as:

New Pension Scheme (NPS): This scheme has steadily gained popularity as one of the best retirement investment options in India. It has also become popular since it is risk-free and backed by the Indian Government. Another advantage of this scheme is that the amount eventually withdrawn is tax-free as per the Tax Act of 1961.

Equity Funds: This is a type of mutual fund that primarily invests in stocks. They are regulated by SEBI (Securities Exchange Board of India), and they have policies and regulations to keep your capital safe. As equity funds are long-term investments, they are a great retirement investment option.

Exchange-Traded Funds (ETFs): An ETF is a type of investment that is purchased and sold on stock exchanges. It holds stocks, bonds, or commodities. ETFs are similar to mutual funds, but unlike them, ETFs can be sold at any time during the trading period.

Save and Start Investing Early

It doesn’t matter which investment options you choose, one piece of critical advice stays the same for retirement planning– start investing early. There are several reasons for this:

  • You get the advantage of compounding,i.e. reinvesting your earnings to create a snowball effect with your profits.
  • You will have more time to recover from losses if you want to experiment with high risk, high reward investments.

Assess Your Net Worth

An essential aspect of retirement planning involves assessing your overall net worth. Net worth refers to the difference between your assets and your liabilities. Assets usually comprise cash and cash equivalents (savings accounts and treasury bills), property, and investments.

On the other hand, liabilities include loans, mortgages, medical bills, and credit card outstanding balances. The amount after deducting the liabilities from your assets will give you a better idea of where you stand vis-à-vis retirement.

Calculating net worth is more useful when it’s done on an annual basis. This will help you in understanding if you are moving in the right direction or if you have to make some changes in your retirement planning decisions.

Know About Investment Fees

While you are focusing all your attention on returns, scenarios could arise where investment fees erode most of your profits. Some of these investment fees include:

  • Administrative fees
  • Expense ratios
  • Transaction fees
  • Loads

Depending on the investments you make, investment fees can increase drastically. The first step here is to figure out how much are you spending on fees. Apart from this, the expense ratio information can be found on your fund’s prospectus.

If you feel you are paying too much, then switch to a financial advisor who can help you cut unnecessary expenses related to your investment decisions. With a financial advisor on your side, you can significantly improve your chances of enjoying retirement with the lifestyle you always dreamt of.

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