Want to retire rich? It’s not very difficult if one uses the right tool and gives it enough time. Here’s a quick one-minute guide as to how one can retire rich. 

Firstly, let’s start with the definition of “Retiring Rich.” This doesn’t mean just building a corpus to last through a lifetime and more. It means building a corpus big enough that would last a lifetime and give one a better lifestyle than before.  

Save more

The first step is to save more.  The ideal retirement thumb rule says save 15% of the monthly paycheque towards retirement. But, for a prosperous retirement, save at least 20% of the monthly paycheque. This will ensure that there will not just be enough money to go around during the retirement period, but one will also have a surplus. 

Make saving easy

Saving is easier said than done. The easiest way to save is to set an auto-debit from one’s salary account into a separate savings account. This different savings account is only to be used as an investing account. This is the account from where all the investments should be made. Keeping the account where one gets a salary, and a separate dedicated bank account from where one invests, makes classifying money easy. Do not use the investment savings account for any other reasons. This way, one will think twice before taking money out of funding account for some unessential want, which would not have been the case if money was lying in the salary account. 

Start investing regularly over a long period from the investment focused bank account though a monthly SIP in an equity scheme. An SIP is one of the best ways to create a large corpus.

Set a SIP

Start investing regularly over a long period from the investment focused bank account though a monthly SIP in an equity scheme. An SIP is one of the best ways to create a large corpus. This will help in three ways. Firstly, it helps to build financial discipline in our lives. Second, it assists to average the unit purchase cost and collect more mutual fund units with inflation-beating returns. And third, it gives helps you to leverage the power of compounding. These are the real reasons as to why investing in equity mutual funds via SIP, for the long term, is the answer to retiring rich. 

The right equity mutual funds

Over-diversification is one of the biggest problems that occurs due to investing in too many schemes. This also leads to a secondary issue, which is the stopping of investments in contingencies because of easy accessibility. One needs to invest in four schemes, for most cases, particularly in the large-cap and multi-cap segments. Large-cap schemes have given around 10-12 percent returns in the past. Multi-cap schemes – they have a slightly higher risk and exposure to market ups and downs but can also be rewarding- offer the potential to earn returns that may be higher than large cap funds. 

Ideally build a portfolio consisting of large-cap schemes along with multi-cap schemes to build a retirement corpus. Make sure to build more such corpuses for your short and mid-term goals, via debt funds, and ensure that the retirement corpus is untouched for withdrawals until retirement. 

Now that you know how to retire rich, what are you waiting for? Go ahead and SIP your way to that luxury vacation in Spain in another decade or two.