There has never ever been a generation that has viewed and conducted their financial planning the way millennials and generation Z do it today. These two generationshave viewed massive economic developments and technological advancements and are caught in between customary financial practices and modern lifestyles that are adversely distinct from generation X, the generation just before them.

Read on to understand the stepwise approach followed by today’s generation to form their retirement corpus. If you are one of those with little clarity about how to begin your retirement planning, then you can even implement the same steps to form your post-retirement corpus.

Begin with retirement investment as early as possible

Today, gen Z and millennials understand the importance of starting to build their retirement corpus as soon as they begin earning. This is because beginning with retirement investment early requires a lesser contribution to reach your retirement goal. Moreover, starting investment early even inculcates financial discipline and helps to benefit from the compounding effect. Due to the compounding effect, the profits that are yielded from your investment start generating returns on their own, thus growing into a bigger corpus over a long time period.

For example, if you are a 25yearold, then to build a retirement corpus equaling Rs 3.22 crore by your retirement age, you may just require investing Rs 5,000 per month towards a Systematic Investment Plan (SIP) in mutual funds if the return rate is assumed at 12% per annum. However, in the case of a 45yearold, forming the same retirement corpus at the same return rate over the upcoming 15-year period may need you to monthly invest Rs 64,500 towards the SIP mutual fund.

Consider inflation

When you estimate your corpus for retirement, you must consider the inflation rate. As inflation lowers the buying power of money, avoiding it can make you save less than you would require during your retirement life. This may enhance the chances of facing financial shortages in your retirement life and thus, may propel you to work beyond your retirement age.

For example, if your current monthly fixed expenditure is Rs 30,000, you would require nearly Rs 3.20 lakh every month for maintaining a similar lifestyle 35 years from now, if the inflation stands at 7%. Thus, you must take the assistance of an online retirement calculator to get an accurate estimate of the required monthly investment forretirement corpus generation post-adjusting inflation.

Purchase sufficient health cover

Given the rapid rise in medical costs in India, the requirement for purchasing sufficient health coverage has become extremely crucial. As your present age is one of the important parameters determining your premium for health insurance, ensure to purchase your health policy as early as possible to keep your premium on the insurance at a lower level.

Additionally, health policies generally have a waiting period before which they do not allow you to make claims for various surgeries, treatments, etc. Buying a health policy early allows you to meet the waiting period and become eligible to make the claims when you require it.

Make equity investments to form a corpus for retirement

Forming a corpus for retirement is a long-term crucial financial goal that may span more than a decade. Equity is an important asset class to meet such long-term goals as equity fund usually tends to beat other asset classes and inflation over the long term by a wide margin.

As you get closer to your age of retirement, say 3-4 years away, activate a systematic transfer plan in the equity fund of your post-retirement portfolio for a steady switch to low-risk debt funds. Such funds hold higher capital preservation features than equity mutual funds while yielding higher returns and liquidity than fixed deposits.

Ending note

If you want a stress-free, comfortable, and hassle-free retirement life, then ensure to give importance to financial security and stability now. For financial security, start your investments to build your post-retirement corpus as early as possible. Doing so would allow you to generate a higher corpus faster with minimal monthly investments.