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Investment options for retirement planning: Part I

Financial planning and investing are inevitable for a safe and financially independent future. Hence you need a sound investment portfolio.

Author:Poonam Tandon | Date:14 Jan 2021 | Time:21:09:00

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Financial planning and investing are inevitable for a safe and financially independent future. Making investments to take care of important life events like marriage, children education, buying a dream house or even meeting medical emergency are important.

Several factors come into play while planning an optimum retirement plan starting from monthly allowances to meeting daily needs to annual plans that can be helpful to meet future needs both short term and long term.

Why is retirement planning so important?

  • Increasing life expectancy: With the advancement of medicine, the life expectancy has increased and that means that a large number of people are living longer post retirement. Since there will be no income for them, they would need to plan for this phase of life
  • Inflation: The purchasing power of money tend to decrease with time due to inflation. Although one’s needs remain the same, the same amount of money becomes less and less worth over period and therefore it is important that your money also needs to grow over time to beat inflation.
  • Rising medical costs: With increasing age, the medical costs increase which puts the senior citizen under considerable stress if he has not provided for it. The inflation in the cost of private healthcare has been growing around 12% pa
  • Falling interest rates: For the past 5 years, we have seen that the interest rates have been falling and that directly reduces the income earning. The person needs to save more to build a bigger corpus to fulfil his post retirement needs.
  • No pension: Majority of the population in India especially in private sector do not have pension and will need to save and invest systematically to have a steady source of income post retirement.

There are a few basic rules that are important to be considered before one begins retirement planning:

  • Retirement planning is a multistep process and should consider factors such as time horizons, estimating expenses, assessing risk tolerance and expected return.
  • Start investing for retirement goals at an early stage so that one can to take advantage of the power of compounding.
  • Younger investors can have more aggressive asset allocation pattern, while investors closer to retirement can be more conservative.
  • Retirement plans evolve through the years, which means portfolios can be diversified and rebalanced.

Do check out Part 2 where Dr. Poonam Tandon explains how we can choose the right investment options.

BY

Poonam Tandon

As one of the earliest members of IndiaFirst Life, Dr. Poonam Tandon today heads the investment management functions at IndiaFirst Life. Poonam is an accomplished veteran with experience and insight into financial markets and investment management in the banking and financial services sector. In her decade long association with the organisation, Poonam has managed several portfolios across Corporate Group Business, Debt portfolio in ULIP and Traditional Fund, Liquidity Management, Asset Allocation for Investment in Equity in Traditional portfolio and contribution to Asset Liability Committee (ALCO). With an illustrious career spanning over 26 years in the financial services sector, Poonam has served at MetLife India Insurance Pvt. Ltd., Paternoster LLC (London based start-up Pension Fund), Securities Trading Corporation of India (STCI) and Industrial Development Bank of India (IDBI) where she started her career in 1994. In her noteworthy achievements, Poonam was instrumental in setting up the corporate bonds desk in 2001, and Swaps desk in 2004 at STCI. The desks became extremely active in corporate bonds, apart from significantly adding to the bottom line of the company. Poonam has taught as visiting faculty at the National Institute of Securities Markets (NISM) from 2010 to 2012. She has delivered guest lectures at the RBI`s Bankers Training College, NMIMS (Mumbai), and UTI Institute of Capital Markets, among others. Poonam has authored two papers that have been published in the international peer-reviewed journals in the Fixed Income category. A B.Com (Hons) graduate from Jesus and Mary College, New Delhi, Poonam is an alumnus of XLRI, Jamshedpur, with a PGD in Business Management. She has earned a PhD in Financial Management from NMIMS, Mumbai.

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