Gone are those days when people were retiring at the age of 60-65 after working for 40 years in the same company. Today we want to work on our own terms. We want to travel, explore, have our own business or not. Most of us are not looking for stability but for growth and excitement. This is considered as a lack of loyalty by a few of the baby boomers, but, we millennials believe in making the most of the opportunities and get maximum returns. We are looking for ways in which we can connect with various people, share our resources and become bigger - faster.

We are able to achieve all of this as we are able to gain from the changes in the business environment, fair trade, and opportunities through social media.  Exchange of ideas and opportunities are just a message away. We don’t even have to type long emails explaining what we do, just a tweet will do it for us.

Hence, most of us don’t want to be a part of a boring monotonous 9 to 5 job but explore more options and work on them. In spite of all of this, we too desire to have financial stability and freedom financially to be able to get what we want to do.

Through this article and working, you will find a path for retirement:

• The total amount you need to retire/financially free
• Monthly investments that you will have to make to achieve the retirement amount.
• Investment options are available to achieve the same.

Regular goal based investing gives you the choice to do what you want to do with life, rather than continue to do what you should do.

How to compute the amount you need for retiring at an age of your choice?

We have attached an excel in this article with the pre-set formula which will help you to compute the amount of your choice. Please note the following points before going ahead:

• Be able to compute your amount, you will have to edit the columns, which are highlighted in ‘blue’.
• The explanation to each number is written in wealth cafe notes
• There could be some specific requirements which are peculiar to you, you can email us about the same
• this table is a general example of computing your way to financial freedom.

Before doing that, we have described the working of the table to help you understand this better.

Table 1 – How much would you need to spend after you retire based on your expenses today.

Table 2 – What is the total corpus (amount) you need to retire.

Table 3 – How much you should start saving today in order to achieve your amount in Table 2.

Ways to Invest to achieve your retirement corpus.

The monthly contribution amount that you have computed from table 3 can be invested in the following ways.

1. Employee Provident Fund/ Public Provident Fund –  Monthly contributions to EPF from your salary (where you are employed), and PPF (where you are not employed) should be made for your early retirement goal. EPF/PPF are long term debt investments which give a tax-free; risk-free return of 12% on average after considering the tax benefit. These investments are made to the government of India and are considered as one of the best debt products. All these factors give makes them a good and safe option for retirement investing.
2. Equity Mutual Funds – Equity Mutual funds are HR-HR (High Risk – High Return) rated financial products. The only way to beat the high risk associated with these investments is to stay invested for a long period of time (i.e. above 10 years). Given that retirement is a long term goal (20 years and above), equity investments is a good option with good returns.            Where you are investing in equity – which is an HR - HR  product, it is important to know that there is a risk which can be triggered when you reach closer to your retirement. To manage this risk, it is important that you should transfer funds from your equity investments to safer debt investment options, a few years before you reach your goal.

For example: when you are 4 years away from your retirement,  there is a possibility of a change in the market and hence, you must transfer your funds from the equity funds to debt funds. This will avoid any major last minute changes in your retirement fund. It is important to take some expert advice at that point to know how much, when and where you should transfer your funds at that time.

Investing to be financially free is the most important personal goal and only discipline and regular investing will help you achieve the same.

You must review your investments, requirements and the entire working in the excel sheet at least annually so that if there are any changes in your investments

Wealth Café  advice – Primarily, you should keep your contribution towards EPF and PPF for your retirement as they are tax-free, risk-free. They are designed to be a retirement investment and hence, are tax-free and have a long term lock-in period. When these contributions are not enough, then you can look at equity mutual fund as an option for your retirement.