Starting Retirement Planning in your 50 Years? Here's How You Do It

Tips to build retirement corpus at 50 years

A person of any age can plan for retirement corpus. It is never too late or too early to plan for it. However, with age, the climb does get steeper. To reach the same magic figure of, let’s say Rs 5 crore, a 20-year-old will have a different saving approach compared to a 50-year-old. It's mathematically apparent, that a 50-year-old would need to be highly aggressive to build a corpus in ten years.

A recent Max Life – KANTAR survey revealed that 90% of respondents above the age of 50 expressed regret for not starting to save early enough. 59% of respondents planning for retirement feared that their retirement corpus will not last 10 post-retirement years. 23% of people didn’t even know where to start when it came to retirement planning. 

Also Read: Confused about whether delay your retirement here are 4 factors to consider in retirement planning

First Step

The first step in retirement financial planning is to identify your retirement goals. Add your household expenses during the month with any other expenses that you need to pay during the year. This will give you your current annual expense. Assuming you retire at 60, it makes sense to keep a 30-year survival period. Your retirement corpus would be 30 times your annual expenses. To ensure that you beat future inflation, you must keep the corpus in investment options that beat inflation rate.

Wealth building after 50 years of age

Once you have your financial goal in sight, you can select the investments that will help you achieve the target. These investments are likely to be more aggressive as you need to build your wealth faster. You will also decide how much you need to save every month to know how to retire peacefully. Given the shorter span, one can assume that it will be a larger portion of your earnings.   

Save more – Experts believe that people starting to save in this age group must save a larger portion of their income. That could mean that you must save and invest 45-40% of their income at the very least. You may have to reverse the 50:30:20 rule and aim to save up to half of your income.

Asset allocation – A person who had begun retirement planning early can lower the risk exposure as age advances. However, if you start at 50, you will have to maintain a higher equity allocation. Despite its risks, equity allocation is the one that can deliver the highest returns. Even the maximum investment in PF/PPF will only deliver a maturity sum of a little over Rs 40 lakhs, at the present interest rate. So, an aggressive portfolio with 50 to 60% equity investments in mutual funds or stocks should make up for the delayed start towards retirement corpus. 

Risk Mitigation – A higher equity investment is likely to result in greater volatility in the portfolio. In the case of a younger investor, patience and long-term holding evens out such risks. In the case of a 50-year-old, financial advice combined with patience is recommended. Besides, to maintain financial security, fixed income saving schemes should be a part of the portfolio. 

Alternate income – Apart from financial investments, you may also consider opening sources of income for your post-retirement life as an alternative to pension. It could mean enhancing your skills for future employment as a consultant or retainer, renovating your real estate property to start a rental income and so on.

Also Read: Simple math equation can help you plan your retirement income

With these personal finance aspects considered, a 50-year-old can plan and build a retirement corpus to last his or her post-retirement life. Calculated risks with professional retirement advisory can ensure that the higher equity exposure results in decent appreciation in investments by the time the person hits 60.

Also Read: 4 investment tools save tax senior citizens and earn good returns after your retirement

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.