How Early Retirement Planning helps?

7 reasons to start Retirement planning early

Retirement planning should be the first priority for all the working people. Retirement planning is essential and should ideally be considered in the early years of working life. Early start helps you to save more and build a decent retirement corpus sufficient to live a quality life.

What do you wish to do post retirement?

Go for a world tour? or

Own a sea-side home? or

Take up a social cause?

No matter what your dreams are, an early start can make a big difference to your post retirement life. It is only by starting early, that you get adequate time to plan, take risks, develop saving habits, earn higher returns and live the retirement of your dreams.

8 reasons to start Retirement planning early

What is Retirement Planning?

Retirement planning is deciding on your retirement goals and allocating a part of your earning to investment plans to achieve those goals.

Ideally, post-retirement  you should be able to get atleast 70% of your current monthly income (pre-retirement) to lead a good retired life. So if your current income is 1,00,000 per month before retirement then you might need atleast 70,000 per month after retirement to enjoy the same standard of living. So, if you are planning to retire in next 20 years, then retirement planning would have to consider investment plans capable of generating atleast 70,000 per month from year 2040 when you retire.

Why you should start your retirement planning early?

Time flies really fast. One day you are celebrating your first day at office and in few decades you are cutting your retirement cake. And you will be facing medical expenses, daily living expenses and rising inflation. Therefore it is very important to build a good amount of retirement corpus to lead a peaceful post retirement life that you dreamed of.

Planning for Retirement
1. Build large retirement corpus:

Lets assume there are two friends, Rohit & Mohit, aged 25 years. Rohit started investing Rs 1000 every month in a mutual fund scheme as soon as he got employed and continued it until he turned 45 years old.He stopped investing after 45 but kept his money invested only to withdraw it after retirement at age 60.

 

Mohit also started investing Rs 1000 a month but started investing when he was 35 years old and continued investing till he reached his retirement age of 60.

 

While Rohit invested Rs 2.4 lakhs in total and Mohit invested Rs 3 lakhs, assuming the annual rate of return is 10%, on retirement Rohit’s portfolio would be around Rs 3 lakhs while Mohit’s would have generated only RS 13 lakhs.

 

Thus though, Mohit invested more money for a longer duration, compounding and time worked in Rohit’s favour who started early. Thus its always better to start early and reap the benefits of compounding.

2. Tax advantage:

As per Indian Tax regulations, tax exemptions are given on particular kind of investments to encourage savings. Many retirement plans and Insurance plans also provide tax benefits. Thus, by starting early, you are not only able to generate high returns but also able to reduce your tax burden.

 

3. Scope to make and overcome financial mistakes:

With so many investment plans and products investment has become a complex process. Lot of knowledge and experience is needed to generate the desired returns from financial market. There are chances that you will end up making few mistakes in the process,an early start will give you sufficient time to learn and recover from it.

4. Go Aggressive:

Rewards and risk are directly proportional to each other for any kind of investment. When you are young with limited financial obligations, you can be an aggressive investor and select high risk product/ plans with high reward potential like small-cap equity mutual funds.

 

Investment in right plan or products could generate excellent returns. But as you grow old, it is better to have a defensive strategy and opt for plans with low risk like debt funds or bank FDs. While they are safer investment options but the return potential is equally low.

 

5. Financial Discipline:

Starting with investments at an early age, make you more financially disciplined. You learn the importance of saving and avoid unnecessary expenses and debts. It makes you more prudent!

 

6. Better financial stability:

Early start to investing and saving will create a financial safety net  ensuring a better financial stability throughout your working career. It will ensure a peace of mind taking off the pressure of retirement and old age.

 

7. Option to retire sooner:

Understanding the importance of retirement planning at an early age and executing a reliable financial planning strategy, it will ensure that you reach your retirement goals sooner in life. With adequate money to live your retirement life, you can even consider to retire early and live peaceful and happy retired life.

 

If you wish for independent and hassle-free retirement, starting early is the best option. Plant the seed today, to get the desired fruits in the future.

 

Start Early. Start Today!

Retirement planning doesn’t have to be a chore. It can be a wonderful experience as you plan for a new phase of your life. Consult a right financial advisor, choose your retirement goal and start investing.

To consult our financial expert, call Akhil Chugh +91-9811264927