Retirement saving is a lifelong process. It sounds daunting to many, especially since the event is years away but it is unavoidable. However, by adhering to some simple rules, an effective retirement plan can be put in place. Here is a list of five top rules for retirement savings.

1. Start young

Compound interest is a powerful tool in the hands of long term investors. The key lies in starting early. Your savings can generate good returns if invested early and given enough time. Also, starting at a younger age equates to smaller amounts of savings and lesser strain on finances.

2. Increase investment as your income grows

An increase in income is usually accompanied by an increase in lifestyle or nullified by inflation. However, even if there is a small scope of increasing the investments, people tend to put it off for later.

Having an incremental retirement savings rate may help you end up with a good retirement corpus. Salaried professionals can boost their investments by periodically adding a percentage of their annual performance bonus or dividends received.

3. Diversify

One of the oldest rules of financial planning is diversification. Young minds are prone to take more financial risks as compared to their older counterparts. A diversified approach can help mitigate the risks due to market fluctuations. The retirement corpus needs constant care and diversification helps achieve that.

4. Clear debts before retiring

A home loan, student loan, personal finance or credit card are debts that should be cleared before entering the retirement years. The retirement corpus is a fixed amount which needs to be handled strategically so that the debts don’t corrode your savings. A debt can have a considerable impact on the corpus if it is not cleared while earning.

5. Don't touch the retirement fund before retiring

This is an important aspect of retirement saving. Regardless of the effort put behind creating a corpus, if the retirement fund starts seeing withdrawals before retiring then one can see a direct negative impact on the fund. Compounding can work its magic only if it is not withdrawn mid-way. Retirement saving is all about creating a spending power at an age when income stops. This should take top priority when it comes to dipping into the retirement corpus.

A well-planned approach and commitment to retirement savings are prerequisites to a good retirement fund. This does take a lot of dedication and planning but helps you achieve financial independence in the golden years of life. These five rules can help in making retirement the beginning of a whole new adventure.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. 

The opinions expressed in this column are those of the writer. The facts and opinions expressed here do not reflect the views of www.moneyfront.in.