Factors to consider for choosing the best retirement savings plan

Investing for your retirement is one of the crucial financial decisions that all individuals must take in order to live a financially independent life during their sunset years. It is imperative to start the investment as early in your career as possible so that you can build the required corpus to live the same lifestyle. Just keeping your funds in a savings account would only fetch you an interest of 2-3 percent, which will reduce the actual value of the corpus if the inflation rate is around 6-7 percent.

Moreover, the increasing costs of healthcare facilities, lifestyle expenses and cost of living have made it necessary to choose appropriate retirement savings plans to live a financially stable retirement life. Here are a few factors that you can consider before finalising a proper retirement savings plan:

Choose a plan that offers ROI higher than inflation: A major challenge faced while investing for retirement is protecting the corpus from capital erosion. Anticipating the change in market prices in future years while investing in a particular savings plan is essential. This will help you build a sufficient corpus for yourself and your family after retirement.

Prefer choosing a plan with a pension: Having a pension scheme helps you plan out your expenses evenly. After retirement, the major issue is with the flow of funds which is not the case when you are salaried. Looking out for pension funds that provide adequate income regularly helps meet the family’s requirements even in your absence.

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Know The Vesting Period: The vesting period is the time till which you need to wait to access the funds. Depending upon your age and the time when you start your retirement planning, you would have to choose funds with a longer or shorter vesting period so that you can access the funds immediately after retirement.

Decide Your Risk Appetite: Understanding your risk appetite is vital when planning retirement. If you have started with your retirement planning at the onset of your career, then you can opt to invest in high-risk funds and stay invested for a longer tenure to mitigate the risk factor. But in case you have started investing for retirement late, it’s better to opt for moderate to low-risk funds and prefer funds with more or less guaranteed returns.

Choosing Funds With Low Charges: Choosing plans that have low fund charges or have at least economical charges is ideal for investment. Investing in plans with high expenses means preserving less for retirement. This is why it is essential to compare all savings plans and make an informed decision.

Finally, Choose a Financial Partner: Planning for retirement is not easy, and you may need a financial partner to guide you with your funds so that you can live a financially independent life after retirement. Your financial advisor would assist you at every stage of choosing the funds and re-assessing your portfolio whenever the scope arises.

It is necessary to start early when you are planning for your retirement. This way, you can have ample time to build your corpus and lead a financially stable post-retirement life.

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