Build a strong corpus for your sunset years with retirement mutual funds

Build a strong corpus for your sunset years with retirement mutual funds


A well-prepared retirement plan to attain an adequate corpus endows you the power to not just be financially independent to meet your daily expenses after retirement but even allow you to meet unforeseen financial expenses like medical exigencies. The ideal way to build your retirement corpus is to begin with your investment in an equity mutual fund as soon as you begin your career. Discussed are some of the important tips you must consider for creating an adequate post-retirement corpus through mutual fund.

  • Begin with your investment early

The sooner you begin with your retirement investment, the lesser contribution is required to attain your retirement goal. Starting your retirement investments early even assists you to inculcate financial discipline and helps you to make the most from the compounding effect. Owing to the power of compounding, the gains you generate from your investment start yielding returns on their own, thus growing your corpus over a long time period. For example, a 25yearold would require a monthly investment in a mutual fund SIP (systematic investment plan) of Rs 10,000 at an assumed annualised return of 13 per cent per annum to form a retirement corpus of Rs 2.25 crore by the age of retirement i.e., 60 years. For a 50 year old, forming the same corpus over the next 10 years at the same return rate would require a monthly investment of Rs 92,000 towards an SIP.

  • Invest in an equity mutual fund to build an inflation beating retirement corpus

Forming a retirement fund is a long-term goal that spans over a decade. As the goal is long-term, you must invest in an equity mutual fund as it is the most prudent asset class known to generate inflation and fixed income beating returns over the long term by a wide margin.

  • Shift to debt mutual funds as you near your financial goal

As you approach the age of your retirement, ensure to activate STP (systematic transfer plan) in equity funds of your retirement investment portfolio to steadily move your corpus to a low-risk debt mutual fund. Such funds are recommended due to their higher capital protection feature as compared to equity mutual funds. Also, debt funds assure better liquidity features and generate higher returns than fixed deposits. Preparing a well-planned STP can assist you to consolidate your gains from equity mutual fund schemes as well as ensure sufficient cash flow to mitigate your post-retirement corpus.

Ending note

Forming a retirement corpus using an equity mutual fund is a simple and easy process. Ensure to get started with your post-retirement investment as soon as possible as it not only provides your investments with more time to make the most out of the power of compounding but also allows you to make the required changes midway if anything is not as planned. Also, ensure to use an online SIP calculator to compute the monthly contributions you must make to attain your post-retirement financial goal within the timeline.