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Retirement is known as the golden period. This is because you have fulfilled all your responsibilities. However, when you retire, you do not have a regular source of income. Therefore, planning for the golden period is important.
You would like to sustain your current lifestyle even after you retire. Furthermore, you do not want to depend on your children for your financial needs in your old age. Investing while you are still working will help you achieve financial independence even after you retire. This also requires a good understanding of the tax structure and income tax slab in India.
Several retirement plans are available, which makes it easier to plan for this period. However, many people delay their decision to start investing for the future. Therefore, if you want to know what the right time to start planning for your retirement is, the answer is ‘today’. When you begin early, you are able to enjoy greater returns during the senior years. You must not wait until you are in your middle age to start planning for the future.
Here is how you can commence retirement planning in the following three age groups.
1) In the 20s
When you are in your 20s, you have just started out in your career and retirement is last on your list of priorities. However, you must not neglect planning for this period. At this age, you probably have fewer responsibilities and not much debt. This means you have a major portion of your income to use towards planning your retirement. It is advisable to commence investing in savings plans, fixed income securities, and insurance cum investment policies for assured returns during your retirement.
2) In the 30s
As you reach your 30s, you may be married and may also have a family. This increases your responsibilities like children’s education and household expenses. Furthermore, you may have loans on your home and car. With the additional responsibilities and debt obligations, you need to be cautious with your money. You must choose financial products that entail moderate risk. Moreover, you must secure the financial stability of your family members with a term insurance policy. In the case of an individual’s sudden demise, a term plan pays a lump sum to the family members. This will enable them to meet any outstanding financial obligations as well as ensure they do not have to compromise on their present lifestyle.
3) In the 40s
Most individuals start considering pension plans and other retirement products in their 40s. When you are in this age bracket, it is likely that all your long-term debt obligations have been covered. Including equity plans for retirement that provide you with the opportunity to accumulate a higher retirement corpus is recommended. Generally, such instruments provide you death benefits as well as guaranteed pension on your retirement.
While there is no right time to start planning for your golden years, starting as early as possible is beneficial. A stable future is possible when you invest smartly at an early age.
Here are three benefits of investing early.
1) Compounding
Compounding allows you to earn higher returns on your investments. This feature enables you to earn profits on your returns. For example, you invest INR 1 lakh when you are 25 years old. You will be able to earn returns on this amount until you retire at 60 years. In other words, your investment continues earning for a period of 35 years. On the other hand, if you invest this amount when you are 35 years, you earn returns only for 25 years. Therefore, investing at an early age provides you higher returns.
2) Retirement corpus
Before you start investing for your retirement, you must calculate the amount you need to accumulate in order to sustain your current lifestyle. This is referred to as the retirement corpus. Due to the rising inflation and expenses, you must start accumulating higher corpus. When you begin investing early, you have the opportunity to build wealth for a longer period of time. This ensures you are able to accumulate adequate retirement corpus for enjoying your golden years.
3) Financial independence
Your primary objective should be to achieve financial independence even during your retirement years. A pension plan provides you with an affordable way to achieve this objective. Starting early ensures you have sufficient corpus to live without depending on your children for financial support.
Planning for your retirement is not only about starting to invest at an early age. You need to conduct extensive research on different products to maximise the returns. If you have not already planned for retirement, it is never too late. Start investing today and achieve financial security in the long run.