Category: Retirement Planning

Why should you start retirement planning early

''The Importance of Initiating Retirement Planning Early"

Many of us work hard and save for a brighter future, but often, we neglect to save specifically for our retirement. Isn't retirement a significant part of our future? Surprisingly, a report suggests that 58% of Indians lack a clear understanding of what their retirement income might look like. One of the key reasons for this lack of interest is the complexity of long-term financial planning.

This post delves into the significance of retirement planning and emphasizes the crucial aspect of starting early. Let's explore the implications of early versus late retirement planning.

The Impact of Starting Early or Late on Retirement Planning

Timing plays a vital role in retirement planning. The sooner you begin saving, even if it's just a small amount, the closer you'll be to achieving your retirement goals compared to someone who starts later.

For instance, let's consider the amount of corpus needed:

Suppose an individual starts a Systematic Investment Plan (SIP) for their retirement years as indicated in the table above. The SIP amount required each month to reach their retirement goal varies.

As demonstrated, even though Kavita requires a larger retirement corpus, her monthly SIP amount is significantly lower compared to Aruna or Jigna. The secret lies in the additional years of compounded interest that bring Kavita closer to her retirement objective. Aruna and Jigna, who start later, need to save more to compensate for lost time. Waiting to begin adds to the overall cost.

When is the Right Age to Start Retirement Planning?

Experts advise that the earlier you commence saving, the better your chances of achieving your retirement objectives. Starting to plan for retirement when you are young and earning an income is highly recommended. Early savings habits can yield substantial benefits in the long run, primarily due to the power of compounding returns.

Retirement Planning for Millennials

With millennials redefining career paths and frequently changing jobs, they need to approach retirement goals differently. Here are some tips to assist them:

  • Consolidate your financial accounts: With accounts scattered across various banks and branches, it's often challenging to track your assets. Consider using aggregators or digital tools to gain a comprehensive view of your finances.
  • Manage your expenses: Keep a close eye on your spending and utilize tools like spreadsheets or mobile apps to plan your monthly budget, set reminders for renewals, and monitor your investment returns.
  • Secure insurance for yourself and your family: Don't assume you won't face health issues or medical emergencies. Insurance can help maintain your family's standard of living, even if you're unable to earn.
  • Define your financial goals: Structure your portfolio to cover aspects like retirement, your child's education, liquidity for emergencies, and sustaining your current lifestyle.
  • Regularly review your portfolio.

3-Steps for Planning an Early Retirement

Do you aspire to retire early but worry about maintaining your lifestyle? Consider these three planning steps:

  • Set a target retirement age tailored to your preferences.
  • Decide whether you intend to work after retiring or not, as this choice can impact your financial corpus.
  • Choose investments that offer guaranteed returns carefully, and consult a financial planner if needed.

Early Retirement Planning Tips and Insights

A few tips to keep in mind:

  • Start early, as demonstrated in the example above, where even a small initial amount can significantly contribute to your retirement goal.
  • Accurately estimate your financial requirements for the long-term to prevent complications in your retirement planning.
  • Pay off all debts before reaching retirement age, as your expenses may rise even as your income decreases in retirement.
  • Maintain a balanced portfolio and avoid overly risky investments, as retirement is a long-term goal where a steady approach is advised.

In conclusion, initiating retirement planning early is crucial. It offers financial security and ensures that you can enjoy your retirement years comfortably. If you have any further questions or need assistance with your financial planning and investment decisions, please feel free to reach out to us. We are here to help you in your journey.

Samiksha Seth Content Strategist – Dilzer Consultants Pvt Ltd.