Retirement planning is extremely important if you are focusing on a better financial future. There are many investment options available to invest in for retirement in India, one of such comfortable ways is by investing in mutual funds. For investors, including residents, Non-Resident Indians (NRIs), and Overseas Citizens of India (OCIs), creating long-term wealth is important to realize future goals and safeguard yourself against inflation. You need to plan your retirement goal in the beginning and work towards achieving those goals. Here in this blog, you will find important aspects to consider once you decide to invest in retirement planning.
What is your Goal for Retirement in India?
Retirement planning is about setting goals and making a plan to achieve those goals. Retirement planning includes basics like:
- Listing down income sources
- Sizing up expenses
- Implementing a savings plan
- Managing both asset and risk
As someone who wants to plan their retirement, you can start anytime but it’s best suggested to start it early. That will give you a lot of time to work towards proper planning and achieve it faster. You need a plan so that you can follow it and achieve your goals. You can have various goals for retirement in India such as:
- Preparing yourself for medical emergency
- Support your family
- Meet your financial goals
- Stay financially independent
Also read: How understanding the Rule of 8-4-3 can turn your Rs 30,000 monthly into Rs 1.5 cr?
What Should be Your Retirement Target?
Many retirement planning experts say that it is recommended to save 10 times your pre-retirement salary and plan to live on 80% of what your salary was before retirement annually. This simply means if you make ₹10,00,000 annually in this case you need at least ₹ 8,00,000 annually to live comfortably. But this amount might vary for everyone as factors like extra sources of income, pension, social security, etc influence it.
- Save a part of your salary: To reach different targets at different stages of life, it’s useful to work towards saving a part of your salary. It is suggested to invest 20% of your salary if you are starting in your 20s and continuing throughout your working life, including retirement accounts and employment contributions.
- Make an emergency account: once you start with your retirement planning you must establish an emergency fund in case of any unexpected medical emergency or event you can rely on instead of relying on someone else.
- Meet family goals: once you retire you might have multiple plans like to travel the world, start a business, or send your child abroad for education.
Also read: What is the 15x15x15 Rule In Mutual Funds for NRIs?
Things to Consider for Your Retirement in India
The moment you set a retirement in India goal and the age you wish to retire, there are many things that you need to consider, like,
- Look at where you stand right now: If you already have a retirement plan all you need to do is to timely check if your goals and your plan match but if you don’t in that case it is very important to make yourself one.
- Increase your savings if needed: With increasing income over the years, you also need to increase your savings amount to achieve your target faster.
- Investment Return: If you start investing early it will take around 3 decades that is 30 years for your money to magically grow. You need to opt for investment adding the most value to your funds.
Also read: How to Make 1 Crore in 10 Years by SIP?
How to Achieve Retirement in India Goals as NRI/OCI?
To achieve these goals for retirement in India you can focus on Retirement planning at an early stage as well as mutual fund long-term investments.
- Mutual funds: Mutual funds can be an ideal option for people looking to build a corpus via investing in Indian markets. Mutual funds can offer much higher returns than bank FDs and can be ideal to build funds for your children’s education in the future. Indian markets have outperformed global markets by min ~110% in the last decade allowing many investors to realize their financial goals. NRI/OCI parents living abroad and looking to fund their children’s education can invest in Indian mutual funds to generate the required corpus.
- Systematic Investment Plan (SIP): Mutual Fund SIP investment allows both resident and NRI investors to start their investing journey with a small sum of money and build wealth in the long run. They are very simple and flexible as each month the fixed SIP amount gets debited from your bank account as per the SIP frequency and invested into the mutual fund SIP scheme that you’ve chosen.
- Bonds: Bonds are debt securities or financial instruments representing a loan made by an investor to a borrower. When you invest in a bond, you are essentially lending money to the issuer, which can be a government, municipality, corporation, or other entity. In return for your investment, the issuer agrees to pay you periodic interest payments, typically at fixed intervals, and return the principal amount at the end of the bond’s term, known as its maturity date.
- Real Estate: Real Estate is one of the top investment options for NRIs in India. It can be a form of retirement abode or an asset to bind the funds in. With the historical trend of immense growth and expansion, Real Estate has carved a separate niche for NRIs.
Also read: 10 Mutual Funds That Doubled Wealth In 5 Years
How to Invest in Indian Mutual Funds as NRI/OCI
NRIs can legally invest in Indian markets via mutual funds. This includes NRIs, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs). There are a few legal mandates like getting their Mutual Fund KYC done along with adhering to the rules of FEMA, SEBI, and RBI. Once your KYC is done, you can invest in domestic and international mutual fund schemes offered by Asset Management Companies (AMCs).
Getting your Mutual Fund KYC is mandatory to open an account to invest in mutual funds in India irrespective of the investment amount. The Securities and Exchange Board of India (SEBI) has specified a set of regulations under the Prevention of Money Laundering Act (PMLA), 2002 which mandates that mutual fund houses and intermediaries perform their due diligence on investors before they are compliant to make investments.
For more info on NRIs, PIOs, and OCIs, you can refer here.
Also read: Step-by-Step Guide for NRIs to Pick a Winning Mutual Fund
Wrapping Up
Planning and investing in various investment options for retirement in India as an NRI/OCI gives you long-term financial security. With various options available you need to choose the best investment option available to you, this decision is made based on your risk-taking and financial goals. Starting early is the key to building a great fund for retirement.
Invest in NRI Mutual Funds with SBNRI
NRIs can now download the SBNRI App and choose to invest in different NRI mutual fund schemes in India with ease. You can also get detailed mutual fund advice from experts at SBNRI. Also, visit our blog and YouTube channel for more details.
SBNRI is an authorized Mutual Fund Distributor platform & registered with the Association of Mutual Funds in India (AMFI). ARN No. 246671. NRIs willing to invest in mutual funds in India can download the SBNRI App to choose from 2,000+ mutual fund schemes or can connect with the SBNRI wealth team to better understand Mutual Fund investments.
FAQS
What is a retirement fund, and how does it differ from other investment options?
- A retirement fund is a specialized investment vehicle designed to help individuals save for their post-retirement years. It typically differs from regular investment options by focusing on a mix of assets tailored for long-term growth and income stability.
Is there a specific age requirement for investing in retirement funds?
- No, there is typically no specific age requirement for investing in retirement funds. These funds are designed to accommodate investors of various ages, including those in their early 20s who want to start planning for retirement early.
How do I determine the right retirement fund based on my risk tolerance?
- Assessing your risk tolerance involves understanding how comfortable you are with market fluctuations. Generally, retirement funds disclose their risk profile, and investors can choose funds that align with their risk preferences, ranging from conservative to aggressive.
What fees are associated with retirement funds, and how do they impact returns?
- Retirement funds may have expense ratios and fees. It’s crucial to understand these costs, as they can impact overall returns. Lower expense ratios are generally preferred.
Can I invest in a retirement fund through systematic investment plans (SIP)?
- Yes, many retirement funds allow investors to contribute through systematic investment plans (SIP). This method involves making regular, smaller contributions, providing a disciplined approach to investing over time.
What are the investment options for NRIs in India?
- There are a plethora of investment options for NRIs in India. The top 5 investment options for NRIs include Fixed Deposits, Mutual Funds, Stocks, Real Estate and GOI Securities.
How can NRI invest in Indian Mutual Funds?
- An NRI can invest in Indian Mutual Funds using his/her NRE/NRO Account. The NRE Account is used to invest on a repatriable basis and NRO Account is used to invest on a non-repatriable basis.
Can I invest from the USA in India?
- Yes an NRI can invest from the USA in India in various asset classes such as FDs, Mutual Funds, Stocks etc.
Can NRI invest in SIP in India?
- Yes, an NRI can invest in India through the SIP route. SIP stands for Systematic Investment Plan.
How to make Rs 1 crore wealth from mutual funds in 10 years?
- You can invest in a monthly SIP of Rs 43,100 for 10 years at an expected return of 12% to generate Rs 1 crore corpus at the end of 10 years. Based on the historical performance as aforementioned, the NIFTY 100 Index has provided 12.3% average annual return for the past 15 years.
How to make Rs 1 crore wealth from mutual funds in 15 years?
- You can use the rule of 15x15x15 to make a wealth of Rs 1 crore from mutual funds in 15 years. With this rule of 15x15x15, you can invest Rs 15,000 a month for 15 years at an expected return of 15% and can generate Rs 1 crore (Rs 1.01 crore approx.) after 15 years.
Can I earn Rs 1 crore from mutual funds in 10 years?
- Yes, you can earn Rs 1 crore from mutual funds in 10 years by investing in SIP every month and become a crorepati from mutual funds.
Can NRIs become crorepati from mutual funds in 10 years?
- Yes, NRIs can invest in various mutual fund schemes in India. If an NRI invests in a monthly SIP of Rs 43,100 over 10 years at an expected return of 12%, they will have a corpus of Rs 1 crore at the end of 10 years. Based on the historical performance as aforementioned, the NIFTY 100 Index has provided 12.3% average annual return for the past 15 years.
Can NRIs become crorepati from mutual funds in 15 years?
- Yes, NRIs can become crorepati from mutual funds in 15 years by following the rule of 15x15x15 and investing Rs 15000 a month in SIP for 15 years with an expected rate of return of 15%, then they will become crorepati after 15 years with a wealth corpus of Rs 1 crore.
