Are you among those people who think that
they are too young to start saving for retirement? If yes then there is a need
to change your outlook. Many people start retirement planning only when they
are close to retirement. This is not a good idea as the later you start the
lower will be your retirement corpus and vice versa. This is because it takes
time for money to grow and give reasonable returns and if you start late your
money will not have enough time to grow.
Starting retirement planning early has lot
of benefits. You can start with a small amount an increase your contribution as
your income grows. In this way you will be saved from making big contributions
towards retirement as will be the case if you start late. You might also be
able to retire early and fulfill your dreams to travel, make time for your
hobbies, etc. Another advantage is that you also get tax exemptions for
contributions made towards retirement plan.
Assuming retirement age of 60, here is an
example of how starting late will affect your retirement sum-
Mr. A started saving for retirement when he
was 25 years old by investing Rs.5,000 monthly, whereas Mr. B started saving
Rs.5000 monthly for retirement at the age of 35. At the time of retirement Mr.
A will have a corpus of close to Rs.2.75 crores (principal + interest), while
Mr. B will have corpus of nearly Rs.85 lacs. As we can see there is a huge
difference in the amount the respective people were able to save for their
retirement. The inflation rate keeps increase every year and a lower amount
will not be enough for you to sustain expenses after retirement.
There are many options where you can invest
for your retirement. These include public provident fund (PPF), employee
provident fund (EPF), national pension scheme (NPS), senior citizen saving
scheme and mutual fund. Many employers have EPF option for their employees as a
part of salary structure. If you don’t have one you can open a PPF account on
your own. These schemes have the potential to give returns of around 8%.
Along with investments you also need to
have both life and health insurance. Insurance premiums become more and more
expensive as you age and hence, it will be wiser to buy insurance when you are
younger. Invest in term plan and health insurance. Term plan will protect your
family from any unfortunate events like death. A health insurance will save you
and your family from during medical emergencies. The chances of illness also
increases as we grow older and so a good health insurance will come in handy.
Retirement planning will not only benefit
you but will also secure your family’s future. You will be financially
independent when you retire and you will not have to depend on anyone for your
expenses. You will also be able to spend towards higher education for your
child, their business/ marriage plans etc. without worrying about draining your
savings.
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