Financial stability is the one crucial factor that ensures that you have a peaceful retirement life. If you have enough money, you will be more prepared to face challenges that elder age may throw at you, including expenses related to health. 

A solid retirement fund is something that ensures the above-mentioned financial stability is achieved with ease.

But creating a good retirement corpus is no child’s play. It needs a good amount of research and perseverance. So let us learn more about retirement funds and explore some strategies that you can use while making one. 

What is a retirement fund?

It is a corpus of money that enables you to continue with your current lifestyle even after retirement, when your main, and sometimes the only, source of income stops. Hence, this amount of money has to be significant enough and should be parked so that it continues to grow and, at the same time, there is less risk involved. 

Now, what works for someone while making a retirement planning may not work for someone else. So strategies should also depend on your risk appetite and the time frame you have to create a fund. 

For instance, if you only have a limited time to create a retirement corpus, you might be forced to choose a more aggressive option to help your fund reach its target. Having said that, below are a few key factors that you should keep in mind to build a healthy corpus. 

Start early

There is a common notion among young people that retirement fund building is something that they can start thinking about later in life. But consider this – a large chunk of your living years could be post-retirement, and you need to fund your future self from the money you are making before you retire (that is, now!). It doesn’t matter how much you earn; you must know how hard it is to even budget for the expenses now. Hence, budgeting for a retirement fund that is big enough during your last few years of employment could turn out to be a big task.

But if you can invest smaller amounts of money starting early in your life, you could cut down on the impact the saved money has on your daily budget. The whole process becomes a lot easier as well. 

The power of compounding

Starting early enables your funds to grow with the power of compounding. In simple terms, compounding is when the profits from the investment are reinvested into the corpus, and the compounded corpus earns profit thereafter. 

For instance, if you invest Rs.10 lakh somewhere and it earns you Rs.1000 on the first day, the compounded corpus of Rs.10 lakhs and one thousand and not just Rs.10 lakhs start to earn returns from the next day. 

15 is the key

Making crore rupees is a significant milestone for your fund. This could significantly help your retirement corpus building as well. 15x15x15 is a rule that could help you here. It says that if you invest Rs.15,000 per month in a mutual fund that gives annual returns of 15% for 15 years, your corpus will be worth Rs.1 crore. 

You can change the investment amount here according to the salary or income growth you achieve to get to the target faster as well. 

Choose a suitable investment

Make sure you choose a suitable investment option to get the best results. This should be based on your target amount, risk appetite, and the amount of time you have to achieve the target.

Building a proper retirement fund is nothing short of a necessity. But, it is equally important to follow the above pointers to make sure you reach your target in time.