Retirement Planning - VSRK Capital

September 3, 2021

Withdraw Tax-efficient Happiness Post Retirement

Everyone has to retire one day. Some people retire at an early age or some retire at their death bed. Let’s directly switch on a product which will give not only income after retirement but also will help tax planning.

Systematic Withdrawal Plan is a facility for regular cash flow with the help of mutual funds. It gives the investor, the freedom to enjoy life one has always dreamt of post retirement. One can withdraw funds from existing mutual fund outlays at pre-set interludes, be it fortnightly, monthly, quarterly or even annually, which will create a regular cash flow for both certain and uncertain needs. One can plan investments and withdrawals with tax advantage. It gives an investor more potential to gain rewards over a span of time, as one withdraws happiness bit by bit.

A Systematic Withdrawal Plan is a divesture strategy that empowers one to redeem fund units in a planned mannerism, instead of a lump sum sale. Constructively, one can withdraw investments in parts, thereby spawning a rhythmic stream of inflows.

An SWP is the antipodal of a Systematic Investment Plan, wherein one invests in mutual funds in parts. Moving funds from savings to a better performing mutual fund scheme is a SIP, while in an SWP, the movement of funds is back into savings account from already made investments. Alike, investing in mutual funds is easy on the VSRK app, withdrawals are also simple and straightforward on the app.

To execute an SWP, one need to withdraw some part of your investment at periodic intervals. Withdrawal money from investment means selling off or redeeming a chunk of the units one holds. The number of units to be sold depends on the NAV on the date one makes the withdrawal.

The period to start SWPs from one’s own funds need to be conceived well in advance to get the complete benefits. It is advisable not to go for SWP in two conditions, first is when one has cash at hand or when markets begins its downtrend. During such times, one should put money to work to achieve preset goals of wealth creation.

Retirement, the phase of life when incoming paychecks halts, is considered as a favorable time to start an SWP.

SWP acts as a rewards of the systematic investments made during working years. People generally ask a very complicated question that for how long the SWP will last? Ultimately the length of SWP is determined by two main factors. The first is the size of the corpus and the withdrawal amount is the second one. Principally, the progressive the frequency and amount pulled out, the swifter will be the rate of abatement of the corpus.

The uptrend performance of the markets are directly proportionate to milking higher amounts through SWP. Contrarily, if markets are showing downtrend, the radius of SWP may dwindle. Making systematic withdrawals using an SWP allows you to take advantage of rupee cost averaging.

Tax implications of SWP

When any investor makes withdrawals via SWP, it allures taxes based on type of scheme. The tax incidence on SWP depends on FIFO method and the holding period.

SWP initiated from an equity fund in the 1st year of investment, it is coined as STCG. The amount will be taxed at the rate of 15%. Whereas, if initiated after 1 year of investment, it falls under LTCG. Long term capital gains are completely tax-free. We at VSRK always suggests to do an SWP from your equity fund investments upon completion of one year.

Risk averse investors investing in Debt funds shall note that the holding period for debt funds taxation is 3 years. Any SWP initiated from the debt fund within 3 years of investment, it is considered as STCG and when initiated after 3 years of investment, it falls under LTCG which are taxed at 20%. Additionally, you can get the benefit of inflation indexation.

Concluding the words, SWPs can heavily aid in unifying income needs post retirement. In order to achieve the most of blessings, VSRK helps to plan SWP according to your requirements and tax incidence.

January 4, 2021

Retire Early and Travel Forever

Have you ever imagined about enjoying a life travelling the world? The solo thought amazes us! What if you retire young and spend the rest of your life travelling the world? We know it sounds a little crazy, but several people have already done this. Most people retire early to travel the world full time and enjoy the life of their dreams. The reality is that we live in a time where it is not that easy to live as you like. Travelling is easier said than done. It is not affordable each time you plan a trip. However, many people have made it possible and taught us how to make travelling affordable. Reading books about the type of life you want to enjoy is always a great source of motivation. They not just only motivate you but implementing the steps will help you to create a new road map to living your dream life.

Early retirement-an easy cup of tea
Early retirement does not come easy, but it has never been easier to make it happen. Few takeaway steps will surely help you to consider a new way of life. It is suggestible to invest around 50% of your income in such a way so that you can get timely growth on your investment. It is up to you to decide how you want to live your life. If travelling is your passion, then saving is the best opportunity. Savings should be a part of your behavior and not just a sacrifice for your dreams. It will make it easier for you to live your life as a traveler.

Krysty and Bryce-best example
Many people shared their views regarding retiring early and travelling forever but, in our opinion, the best of all is the experience shared by Kristy Shen and Bryce Leung. They both have written a book named- quit like a millionaire. One of the best books we have ever read. It is full of real deals and original strategies on how to travel the world forever. They quit their engineering jobs in their early 30’s to travel the world. Their book is all about simple rules, optimizing your investment efficiently, and to build a 7-figure portfolio. Their FIRE story has featured in the New York Times, CNBC, and UK independent.

Early retirement-never a regret.
If you think retiring early and being rich can only be possible when you have inherited property or won a lottery, there is another example that will change your mind. The Bangalore based couple laid a job as It engineers and retired in their early 20’s. They never regretted their decision & they consider it as a crucial step towards their success. During the time of their retirement, they were earning five figures. Adopting FIRE philosophy-financial independence & retiring early, has given immense popularity among the working people in history and will be beneficial in the future as well.

Adopting FIRE approach
FIRE approach aims to maximize your savings rate. Focus on your spending rather than on earning. Most people have a common misbelief that early retirement is possible for the people with high paying salaries rather it’s difficult for people with a spendy lifestyle one should be very controllable regarding his/her spending habits. The approach is simple- don’t make your cost of living unnecessarily high. While travelling this will help you to an extent- when you will move from country to country, you will be comfortable. It’s never been easy to travel with less money. Learn more about travel rewards, use credit card rewards. Travel smart, not expensive.

Saving strategies
Getting older and potentially starting a family may change your travel lifestyle in the future. You have to preplan your guide map that will lead to a completely balanced lifestyle- family, money, and travelling. Exploring the world never comes with a simple step of having money, but it’s all about strategies you plan with your money. Saving, investing, and spending is the key interlinked with each other. You have to balance them to unlock the door of your dream life.
Live life like an adventure, explore the world as a traveler!

December 4, 2020

How to Retire Early?

It’s a common perception that retiring late will provide you more money for a secured future. However, it does not work like this. Retirement planning is not about working more but more about starting early. Retirement plans are formulated beforehand. Whether you retire early or late, each has its own benefits according to your plans before and after retirement.

The word ‘retirement’ makes you think of a retirement at an old age, probably 60 or more. Turning old often brings a comparatively less-energetic body and makes one vulnerable to various health issues. Such conditions force one to spend majorly into medical services. So, it’s better to plan retirement at an early age. To retire early, you have to make pre-plans regarding your savings and expenditure. If you are planning an early retirement, it’s best to start saving your money from the time of your working days.

It is advisable to keep a separate saving for your expenses. Children’s education, marriage all can be handled by the debt securities that you will own. Debt mutual funds are considered the most beneficial step regarding the investment of your money. You can monthly invest some amount of money in deposits and at the right time, you can get a lump-sum of amount from these debt instruments.

Education nowadays is the most important key for self-independency, respect in society, and a standard lifestyle. You cannot compromise on the education of your child and will have to save separately for this. The higher education of your children requires a huge amount of corpus and many middle-class families are not able to cope up with such high fees. Many education plans are being grown-up for student’s bright future, be interested in such plans, and invest here.

You have to see your retirement with optimism. Securing your present, while covering your future needs requires detailed plans and proper investments. It is advisable to have a balanced mutual fund portfolio which invests in the long term as well as short term investments. Long-term investments will meet your future needs on the other hand short-term investments will help in current present expenditures. Apart from the above-mentioned expenses there are some other household expenses which seem to be small but are fixed in nature. After investing in these investments, the left-over amount can be useful in small fixed-unfixed expenses.

Following these steps will surely be helpful in your early retirement planning. After meeting all necessities, just save a small part of your salary for your requirements. Retiring at an early age will enable you to explore the world and to focus on yourself. But this could only be done when you are relieved from the tension of all the responsibilities.

Making a systematic rule for every step will not only help you but also your family. Education, marriage, retirement all will be planned so you can spend the most time with your family and do whatever you want. A middle-class working person lives for his/her family and responsibilities but she/he deserves the time to live for herself/himself too. You can travel and explore after working for years, your financial plans can give you a good vacation and trips with your family. Don’t consider early retirement a bad sign. If your plans are well-structured and takes care of every nook & cranny of your financial needs, you will not face financial problems and will always be economically stable. You can start to save some money from your early days for your travel after retirement. Don’t make retirement a full stop on your enthusiasm, make it a new beginning. Life is never so short to explore and to live a life, full of life!

November 23, 2020

4 Tips For Planning Your Retirement

Planning a retirement is not always easy. It’s the biggest decision you’ll ever make and a lot of things have to be considered before it can be made. Regardless of age, whether you’re 25 or 55, investing in retirement planning is always a wise financial plan. Everyone will face a time in their life when retirement is just around the corner, either by necessity or by choice.

Whether you need to catch up with the Joneses or want to better prepare for your later years, there are many options available to you in the form of investment strategies, saving strategies, and even tips for early retirement. There are also plenty of guides and articles written on the topic of retirement, including the essentials on saving, investing, and creating wills.

Great Retirement Planning Tips

For many people, saving and investing for one’s retirement day will not be an easy process. The goal is not to have the most money that you can, but to have enough to support your family and keep living comfortably until retirement. It is important to realize that, while saving money is a vital part of any retirement planning, investing money is not the only step to take. You also need to have the knowledge to determine when to invest your money so you don’t spend too much and lose it all.

These are four tips for saving for your retirement that anyone can use.

Diversify

First, make sure to diversify your investments. Diversifying your portfolio is the single best thing you can do for your retirement. Once you have a solid portfolio that covers a number of different markets, you can start to look into which investments are safe. Choose safe investments in order to protect your money from losses and to allow it to grow gradually over time.

Save

Second, set aside some money to save. You’ll need money to invest in your savings account. It can be as small as $100 every single month, if you wish. Put that money aside for when you need it, whether it’s for unexpected medical bills, or a vacation down payment on your next home. This money will serve as a buffer against the effects of inflation, and any other emergencies that may occur.

Budget

One of the most important things that you have to do when planning for your retirement is to create a budget. There are a lot of things you have to consider when you’re dealing with your finances. You also have to look at your expenses and see if they’re reasonable. If they’re not, then you have to be honest about them and decide whether they can be adjusted accordingly.

Be aware of your spending habits. You may be tempted to spend more than you earn, but you’ll also need to consider that this will eat into your income. Budget your money and set aside enough for your future living costs.

You should be conscious of how much money you have now, and how much you are going to make for your future. You should also have a clear idea of where you want to retire, because it has to be planned long before it happens. If you plan out the whole thing in advance, then you’ll be able to handle all kinds of situations that can arise during your retirement years.

Get Professional Help

To help you plan your retirement, it’s important to choose a firm that can help you sort out what’s necessary for now and what’s needed for the future. This step may be simple for some. For others, they may not need to work with a personal finance expert that can help you choose the right option. You’ll need to make a list of your priorities, and go with the one that best meets your needs, be it a bank, or a private investment company.

If you prefer a more hands-on approach to investing, or if you just want to be more knowledgeable with your money, you may find an e-book a helpful tool. Even a good retirement calculator can be helpful in determining how much money to invest or save. With all the resources available on the internet to teach you regarding your retirement, be careful about scammers that are only out to take your money.

Conclusion

Planning a retirement is the same as planning your life, because you have to strategize so you can live comfortably and successfully. No one wants to be caught off-guard down the road. There are so many questions to be answered and so many details to be taken care of. Do yourself a favor and begin that process now. Research the variety of ways you can save or invest. Talk to someone about diversified accounts and early retirement plans. Check out all your options so that you may live out the rest of your days in comfort and security.

June 3, 2020

Top 5 Reasons to Start Investing Money For Future Financial Stability

Investing refers to the process of setting out a certain sum of money for a set purpose and participating in certain securities which help in the achievement of the objective for which such investments are created. The sole purpose of such investment is to earn profits in the course of investment in such funds & securities.

Diversify your assets & associated risks

Economic assets are of essential value to our livelihood especially in times of extreme difficulties such as the ongoing pandemic. Distributing your money into several modes of investment and investing in various securities helps us to minimize the associated risks.

Saving money loses to inflation

After making the necessary expenses a lot of us set aside the amount left. However, due to the effects of inflation and the concept of time value of money such amounts kept in our wallets or savings bank accounts continuously lose their actual value.

For example- If the rate of inflation is 2% per annum and you could buy 1 kg apple for INR 100 toda, the next year it would cost INR 102 for the same 1 kg of apples and similarly after 10 years the same 1 kg apple would cost you around INR 120.

Due to the inherent limitation of time value, saving is not the best option. Investing such saved funds helps you fight the effects of inflation by generating returns in the form of dividend or interests or in such other manner as maybe applicable.

Increases earning potential

Making informed investment helps you in many ways such as reducing the risks of losing all the money by diversification as well as generating revenues in the form of interest, dividend, etc. Such extra income helps in increasing the earning potential in many ways. You may use the extra amount in starting a new venture, initiating a side hustle or just further investing such an amount.

Power of compounding

Compounding is said to be the 8th wonder of the world. The power of compounding could be understood by the following example- if you start investing INR 500 month for the next 40 years at 18% interest rate per annum the total investment over the period would be just INR 2.4 Lac but the accumulated value received would be INR 4.29 Crores.

Get tax benefits

The Income Tax Act provides various exemptions and deductions from the taxable income. So, for example- if you were falling under the 30% tax slab and you make an eligible investment of INR 1 Lac you save around INR 30,000 just by making such an investment as you won’t have to pay the tax on the same.