The most dangerous act in Retirement Planning is, ‘I will invest only in highly safe investment for Retirement corpus’. Why it is dangerous? Because it deprives the investors to take growth oriented decision. There is no growth if one doesn’t take some risk.
Planning for Retirement and Retirement Planning are two different phases.
Planning for Retirement – In this phase, one is planning to create wealth for retirement which is 10, 15 or 20 years in future. While being young, one can aggressively participate in Equity investment by SIP route and take maximum benefit of compounding. However, the equity allocation should gradually come down when retirement age is nearing
Retirement Planning – In this phase, one is already retired and have received money from various sources. Investment in this phase takes care of cash flow, liquidity and safety. The significant task here is to manage taxation. During years in retirement, one cannot afford the outgo of taxes. Cash flow through SWP mode is desired situation to receive it as regular income.
In Formula One racing, the biggest advantage is that the driver has to take immediate lead once the race starts. It is winner’s strategy to take lead in the initial moment.
Similarly, Planning for retirement is a long term race. While planning for it, one must take first step lead by adopting aggressive investment strategy. Of course, it depends on the age on which one is planning for retirement.
We believe that retirement is the single most important goal which is need of the day.