Retirement is one of the major goals for financial planning. It’s even more important in India because around 62.5% of the working population in the country belongs to the age group between 15 and 59. People nevertheless tend to disregard or postpone retirement planning until it’s too late. Starting it later may lead to a loss of tax benefits and market-linked investment returns in your working years, which could be a costly mistake.
Beginning investments in a retirement plan early can help you maintain a decent lifestyle even after your working years. But which is the right age to start? Read on to know more.
When Is the Best Time to Begin Retirement Planning?
The right time to start retirement planning is when you get your very first paycheck. This is when you are usually in your 20s or 30s. But don’t worry. You’re going to gain later from it. A retirement investment plan can offer you a life cover while also financially protecting your family.
Younger individuals have fewer financial liabilities. So they are in the most favourable position to invest and save more. In this sense, they have enough money and time at hand to afford to invest in potentially profitable instruments. They usually also have a higher risk appetite to afford aggressive investments like those in the equity market. Historically, even though it is erratic in the short term, it has the potential to generate steady returns in the long run that can even beat inflation.
In your 20s-30s, you can begin a retirement investment plan that can secure your finances in the long term when a steady source of income isn’t available anymore. If you delay your investments even by a few years, your retirement planning can be impacted. Be an early bird to prepare for your golden years by making the most of your earning years to build savings over time. The amount you can put aside periodically in your 20s will differ from that in late-stage planning. A retirement calculator can help you decide on a suitable amount.
In case you are already late, you can still start planning. If you’re approaching your retirement age, you’ll have to focus on risk mitigation while planning. In this case, prudent capital preservation is preferable to investing aggressively. Slowly reduce your exposure to risky instruments like equities and increase your investments in fixed-income avenues. By the time you stop working actively, you can expect to have a dependable source of money to substitute your principal income stream.
The amount that you must save regularly to build a large corpus for your golden years depends on how early you start investing. Consider using a retirement calculator on the insurer’s website to determine the ideal amount.
Make sure to choose a reputed insurance provider to pick the best retirement investment plan. The longer you remain invested, the more time you get to accumulate wealth for the distant future. Thus, you can make the most of the power of compounding to grow your deposits manifold.