Retirement & Financial PlanningJun 26, 2015•4 min read
Retirement Planning Impacts Everyone
Thanks to higher life expectancy and higher health costs, the world of retirement planning has undergone a significant change.
Tejas Shah
Proprietor of Silicon One and Silicon Systems, AMFI-registered Mutual Fund Distributor since 2004, based in Vadodara.
In the old days, retirement planning was a relatively simple proposition — one job for most of a career, a pension, and children who took care of their parents. The world has changed, and it's time to plan accordingly. Equity is widely perceived as risky, which is why many investors lean heavily on fixed-income instruments when saving for retirement — but the greatest risk for most investors is actually not meeting their goals.
Why avoiding equity backfires
Any investor who parks too much in fixed-income assets faces inflation risk and shortfall risk. A high inflation rate erodes the value of savings. Focusing purely on volatility and eliminating equity from a retirement portfolio actually exacerbates shortfall risk over the long run.
SIP returns across major funds (as on 31 Dec 2014, Rs. 5,000/month)
Don't let poor short-term returns hinder a critical long-term decision like retirement. The stock market will always go through bear phases — don't take a myopic view of it. The best chance of not running out of money in retirement is a sensible, adequate participation in the equity market, and SIP is the best tool for it.
