How do you plan for retirement?
Key facts
- Retirement has two phases, accumulating a corpus and then drawing income from it.
- The accumulation phase rewards starting early, because decades give compounding room.
- Regular investing, such as a step-up SIP, suits building a corpus over working years.
- The approach usually shifts towards stability as retirement approaches.
Two phases, one plan
Retirement planning is best understood as two phases. In the accumulation phase, over your working years, you build a corpus. In the drawdown phase, later, you turn that corpus into an income. The two need different thinking, and this page is about the first; retirement income covers the second.
The accumulation years
Here, time is the biggest lever. Starting early and investing consistently, even modestly, lets decades of compounding do work that a late, larger effort struggles to match. A step-up SIP, which rises with your income, is one common way to build a corpus steadily over a career.
Because this is a long goal, the early years usually allow more growth orientation, with time to recover from market falls.
Shifting as retirement nears
As you approach retirement, a market fall matters more, because you have less time to recover and will soon depend on the money. A common approach is to shift gradually towards stability in the years before you stop working, protecting the corpus you are about to live on.
How big the corpus needs to be depends on your expected expenses, other income, and how long you may live, and since people are living longer, planning for a long retirement is prudent. To build a plan around your numbers, talk to us.
Frequently asked questions
When should I start planning for retirement?
The earlier the better, because the accumulation phase rewards time more than almost anything else. Decades of compounding can turn modest, regular investing into a substantial corpus. Starting late is not a reason to skip it, but it usually means investing more, or working a little longer.
How should my investing change as I near retirement?
A common approach shifts from more growth orientation in the early years to more stability as retirement nears, so a market fall just before you stop working cannot devastate the corpus you will soon live on. Exactly how and when to shift depends on your situation and comfort with risk.
How big should my retirement corpus be?
It depends on your expected expenses in retirement, how long you may live, and other income like a pension. There is no universal number. Because people are living longer, planning for a long retirement, rather than an average one, is a common and prudent stance.
This is general information, not a recommendation for your situation. If it would help to talk it through, we are happy to. Talk to Nico Wealth.
The information on this website is general and educational. It is not financial, tax, or legal advice, and not a recommendation for your situation. We try to keep it accurate and up to date, but it may contain errors or become outdated. Please verify important details from official sources, and consider your own circumstances, before acting.
Sources
Last verified:
Have a question about this?
If you would like to talk it through with a real person, Nico Wealth is here. No obligation.
Talk to Nico Wealth