00:00 Intro 00:11 How much money you will need to retire 00:36 Build a retirement plan 01:02 Payoff your loan 01:30 Build sources of passive income 01:59 Step-up investments
1. Calculate how much money you would need to retire: The first and most important step toward retirement planning is determining how much money you will need to retire by a certain age. Because of inflation, your monthly expenses in retirement may be multiples of what they are now, making it very easy to underestimate how much money you will need to retire. You can use the Kuvera financial planning calculator or the Kuvera goal based investment tool to set your retirement early goal and figure out how much money you'll need to retire.
2. Build a retirement plan: Once you've determined how much money you'll need to retire, the next step is to devise a strategy to get there. Investments made during the early years, no matter how small, contribute significantly to the retirement goal.
By starting early, you avoid the burden of having to invest a large sum later. Growth-oriented investments for retirement can include a higher allocation to risk assets such as equity and equity mutual funds.
3. Pay off your loans as soon as possible: The interest loan on most types of loans is usually higher than what you would otherwise make on your investments. So it makes sense to pay off any kind of high-interest loans such as personal loans, or credit card dues before you start investing.
A home loan might have a lower interest rate but due to its big size, its tenure may run into decades. One way to drastically reduce the tenure of a home loan is to strategise prepayments during the first half of the loan tenure.
4. Build sources of passive income: Building sources of passive income is one way to reduce the stress of investing an unreasonable amount of money toward your retirement goal. Passive income is a type of income in which you work or invest once and then receive payments over time. This can take the form of rent, dividends, book sales royalties, or recurring commissions. Having sources of passive income increases your total income, allowing you to reach your retirement goal sooner.
5. Step up your investments every year: Increasing your investment contributions as your income grows makes sense. Increasing your investment contribution as your income rises will help faster accumulation resulting in a quicker realization of your retirement goal.
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