Why Is It Important to Start Early Retirement Planning?
How old are you? Twenty; twenty-five; or thirty? It doesn’t matter how old you are now, but the thing that matters a lot is the time which is left ahead for your retirement. This is because the later you begin planning an investment for your retirement, the more difficult it becomes to manage the finances; and in fact, many fail to plan it adequately because of ignorance at the early age. Let’s read a story which will put you in a realisation if you haven’t started your retirement planning yet.
There were two friends, Arun (29 years) and Karan (30 Years), both were doing well in their career and enjoying their lives happily with their families. Karan started his retirement planning at the age of 25, and when Arun came to know about it, he laughed at Karan and said “You are a young man, my friend. Why are you worried about your retirement at this age? You have enough time to think upon that.” Karan was saving Rs. 5000 per month through SIP for his retirement whereas Arun was waiting for the right time to think about his retirement. Karan’s investments got 35 years to grow as he started early at the age of 25, and when he retired at the age of 60, his investment turned to a big corpus of Rs. 3.71 crore. Now, Karan can efficiently enjoy his retirement as he has enough wealth to spend. Contrary to this, Arun couldn’t make any wealth because he kept waiting for the right time and when he thought to start planning he was already 45-year-old. At that age, he had to save Rs. 20,000 per month which could grow to Rs. 1 crore by his retirement age, i.e., 60 years. But, he was unable to make out Rs. 20,000 monthly to invest and at last, he ended up with no wealth.
From this story, you can clearly understand that you need to start early to plan for your retirement. If your objectives are big and you wish to earn excellent corpus by your retirement age, then you must start it right away through SIP because the power of compounding works better each year. Furthermore, SIP shows multiplied returns on your investment if you start early, and you need not invest big instalment amounts like Arun.
We have now understood that an early start is important to create wealth for retirement in time. But, many people do not give priority to their retirement planning. If you are also one of them, then you must read the below lines to know what may be the situations during your retirement.
You must be investing some of your money into life insurance to safeguard your family in case of any uncertainty happens to you. But, have you ever realised that when you are investing in insurance plans to cover the risk of dying early, then you must also protect the risk of living longer? Yes, you’ve heard it correct. Risk of living long is also financially threatening. Let’s know how!
Suppose you set your retirement age at 55 years, and your current age is around 30 years. Now, you have 25 years for your retirement. You must have some dreams to enjoy a tension-free and happy retirement like the way you are enjoying your days now. If you are spending Rs. 1 lakh per month for all your expenses, you will wonder knowing that it would be Rs. 5.4 lakh per month at the age of 55 years considering 7% inflation rate. It means you will need around Rs. 65 lakh annually to cover your happy retirement. Furthermore, if the general life expectancy after retirement at the age of 60 is 20 years, then you will have to be prepared with a corpus which is capable of meeting your 25 years (55 years to 80 years) considering 65 lakh annual expenses.
Above all this, you have many objectives to be achieved before you get retired like own house, a car or any other goal. After achieving all these goals, you may not have that much finance left to plan your retirement. That is why starting early for retirement planning is a good option. Early start benefits of SIP also allow you to invest less and earn more because by starting early, your investments get more time to get multiplied due to the power of compounding.
Initiate the good thing today; it will help you to overcome all your bad phases tomorrow. An early start to the retirement plan will help you to enjoy life happily. Therefore, start planning today for your retirement to create wealth for your future. If you have understood the value which you may lose by starting late, then start right away with MySIPonline. We have a variety of retirement plans from the best AMCs in India.
- LTCG Tax Is Not As Negative As it Seems; Here’s Why?44374 min read Jan 01, 1970
- Sensex Plunges Over 1000 Points; Should You Buy or Hold Your Investments for Correction?45163 min read Jan 01, 1970
- Sensex Dives Nearly 840 Points: Things to Consider and Experts’ Take46023 min read Jan 01, 1970