Various investment options are available in India for NRIs so that they can create a retirement corpus. However, a little research and analysis are needed for effective retirement planning. Here are some tips that can steer them in the right direction.
India is home to about 32 million NRIs (Non-Resident Indians) and PIOs (Persons of Indian Origins). NRIs invest in India to diversify their portfolios and to create funds for their financial goals. Retirement planning is one such goal that needs careful planning for a comfortable life after hard work.
Various elements go into a well-crafted retirement plan, especially when you are an NRI investing in India. So, before you set your retirement planning in motion, here are a few things to keep in mind.
Things to consider for better retirement planning for NRIs
#1. Inflation
Inflation means a rise in the price of goods and services over time. This affects your future financial needs. What costs Rs 100 today would not cost the same 15 or 20 years down the line. As such, when you estimate the retirement corpus that you need, factor in inflation.
For instance, say you need Rs 5 lakhs annually for your lifestyle expenses today. After 15 years, this might increase to Rs 20 lakhs due to inflation. If you aim to retire at 60 and if the life expectancy is assumed to be 100 years, you need a retirement corpus of Rs 8 crores (Rs 20 lakhs X 40 years).
#2. Fluctuating exchange rates
When investing in India, if you use your foreign income for your long-term investments, you need to factor in the fluctuating exchange rates between the involved currencies. Since your foreign income would be converted to INR (Indian National Rupee), the exchange rate would affect the conversion.
#3. FEMA regulations
The Foreign Exchange Management Regulations (FEMA) dictate the rules of NRI financial transactions in India. These rules are dynamic and might change in the future. You will have to know the FEMA regulations and stay updated about any changes later on.
#4. Taxation
NRIs are required to pay income tax on the income that they earn in India. The tax rates and applicable rules might change with changing times. With the range of tax-saving avenues available for investment, you should know the tax rules and also the changes that happen therein.
#5. Settlement goals
Assess where you intend to settle after retirement. This would help you estimate the corpus needed and plan your investments accordingly. Settlement abroad would require a larger corpus compared to settling in India.
#6. Investment horizon
Ascertain your investment horizon, i.e. the years till retirement. This would help you pick suitable investment avenues and also calculate the savings required to reach your financial goal. For instance, if you aim to retire in the next 10 years, you need to save aggressively compared to when you have 15 to 20 years till retirement.
#7. Risk appetite
Risk appetite means your risk-taking ability. Knowledge of your risk tolerance level is important to choose investment options that align with it. For instance, if you don’t mind taking risks, equity-oriented investment avenues would be suitable, and if you are risk-averse, debt instruments would be a better choice.
How to plan for retirement
Now that the groundwork is done, here are some tips that can help with effective retirement planning –
- Start early
When you start investing early, you have a long-term horizon. You can save affordably and still create a sizeable corpus with the power of compounding.
- Plan for emergencies
Emergency planning is essential to ensure that your retirement planning stays on track, even when there’s a financial crisis. Create an emergency corpus and invest it in a liquid avenue, like a savings account or a liquid mutual fund, for those rainy days.
- Diversify your portfolio
Do not play favorites when it comes to choosing investment avenues. Have a well-diversified portfolio that has a good mix of equity, debt, gold, and other assets. This would help you spread the investment risk while maximizing the return potential of your portfolio.
- Stay focused
When retirement is far off, you might lose sight of your goal and stop investing towards the retirement corpus. This is a mistake. Stay focused and invest in a disciplined manner to keep your retirement planning on point.
- Review the plan regularly
Track your investments and their returns and review your retirement plan at regular intervals, at least annually. This would help you take corrective measures if needed and ensure that your plan is going in the right direction.
In Conclusion
Whether you settle in India or abroad after retirement, having an optimal retirement corpus helps you enjoy your golden years without financial worries. If you are planning for retirement, see if your plan needs any fine-tuning. If you have no plan in place, there’s no time like the present to start. IDFC FIRST Bank offers a host of NRI solutions that can help you with retirement planning. You can open a suitable NRI bank account and invest in some of the best retirement plans in India for NRIs to meet your financial goal. Start today and take steps to secure your retirement.
