Retirement can be a decades-long journey, and people must be prepared for it both emotionally and financially. A good retirement portfolio shall be needed to pay off the bills of a person when they are retired and hence no longer drawing an income. Kavan Choksi underlines that the process of developing a retirement portfolio largely involves a combination of long term investments and regular savings.

Kavan Choksi mentions the major factors to be taken into account to create a retirement fund

While planning for retirement can look different for people in diverse phases of life, it is never too early to get started with these plans. A lot of people think that simply keeping their savings in a bank account shall help them to reach their retirement goal with time, but this is a major misconception. After all, the value of money might get eroded over time due to inflation. Moreover, one would want their money to work harder, and hence must take certain risks for better potential returns.

Here are a few factors that have to be kept into account to create a robust retirement fund:

• Risk appetite: The risk appetite of a person ideally evolves as per their goals and commitments at distinctive points in their life. For instance, the younger a person is, the greater level of risk they can afford. This is due to the factor that a younger individual is likely to have lesser financial commitments and greater time on their hands to recover any possible losses. However, it is also vital to note that every person has distinctive life trajectories. Hence, they must assess their risk appetite as per their lifestyle and goals. There are multiple insurance solutions available that can address the financial concerns of a person, while also aligning with their risk appetite.
• Time horizon: Typically, if a person has an aggressive risk profile, a large part of their retirement portfolio must be set aside for higher-risk investments in case they start in their twenties. As they progress closer to their retirement years, their portfolio of the person is likely to be more focused on insurance solutions that are of lower risk and offer relatively stable potential returns. People can choose to allocate their investments into products of distinctive time horizons on the basis of their risk appetite.
• Inflation: To make sure that their money is able to preserve its purchasing power during their retirement years, people must make sure that their money is growing at a rate higher than inflation. As a result, they should opt for investments that can provide them potentially higher returns than the inflation rate, with the condition that the investor can accept the accompanying level of risks.

As per Kavan Choksi, building a retirement fund can be a long process, which many people put off for later. However, by starting late, one will also need to set aside larger sums to reach their retirement goal. Hence, it is better to start planning for retirement and putting money aside for its fund when one is in their twenties.