Busy Working on your Retirement Plans? Here is How SIPs can Help
Posted: Oct 10, 2018
While you are done with most of your responsibilities by the time you reach your retirement age, it is still very important for you to make sure that you have adequate funds once you are done with your professional life. Fortunately, Indians are getting more and more aware of retirement planning and many of them start saving and investing for it from an early age.
But with so many options now available, most people find it difficult to build a retirement plan. SIP is an excellent tool to help you save and earn handsome returns on your investments. Continue reading to know how SIPs can help in retirement planning.
1. Start Early
The most important benefit of adding SIP to your retirement planning is its ability to allow people to start investing at an early age. Most mutual fund schemes in India will enable you to start a SIP with as little as Rs. 1,000.
This means that you can start saving for your retirement right from when you are in your 20s. Keep investing consistently and this small but regular investment would turn into a large portfolio by the time you retire.
2. Many Different Funds to Choose From
Depending on your retirement goal, risk appetite and age, you can select from a wide range of different mutual funds to begin your SIP. If you are young and planning to build a large investment corpus, there are many different types of equity funds that you can choose from.
If you are in the late 30s or 40s and searching for safer options, you can select from many different types of debt funds. Moreover, there are also ELSS funds where you can save taxes.
3. RCA Benefit
The Rupee Cost Averaging or RCA benefit is probably one of the most important with SIPs. With RCA, you are not required to worry about the market conditions when investing through SIP. You just need to select a fixed amount that you want to invest every month and the same amount would be debited from your bank account every month.
If the market is high, you’ll get fewer units, and if the market is low, you’ll get more units. In the long run, your purchases will balance out even when you are investing in something as volatile as equity funds.
4. SWP to Meet your Expenses after Retirement
Apart from SIP which allows you invest a fixed amount at regular investment, you also get to take advantage of SWP or Systematic Withdrawal Plan when you invest in mutual funds. With this facility, you can withdraw a fixed amount from your mutual fund investments at regular intervals.
After your retirement, you can use this facility to regularly withdraw money from your investments to meet your expenses while the remaining money would remain invested and probably grow further.
5. Makes you a Disciplined Investor
If you want to achieve your retirement plans through investments, it is very important for you to be a disciplined investor. You should invest regularly irrespective of the ups and downs in your life.
SIP is a powerful tool which automatically makes you a disciplined investor and takes you closer to your financial objective. It allows you to invest money on a regular basis to help you earn higher returns than irregular lump sum investments.
Apart from retirement planning, SIP is an excellent way to achieve all your long-term and short-term financial goals. It is highly flexible, easy to begin and with so many funds to choose from, you are sure to find the right match to start your investment journey from an early age.
If you are planning for a long-term financial goal, a mutual fund Sip that suits your objectives and your surety of getting exceptional results can be an excellent option.