Financial Planning

At what age should I start planning for my retirement?

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Praveen couldn’t help but laugh when Ravi asked him about his retirement plan. “You must be kidding. Who is thinking about retirement? It is too far away,” says the 28-year-old engineer.

Praveen is not the only one who is sloppy about his retirement. For most youngsters who have decent salaries believe in living for the day. You surely expect an early retirement with a nice house, fancy car with all the comforts. But very few of you take it seriously and actually begin working on it. For some, it does not even feature in their future vision just like Praveen.

The baseline is that planning for retirement is very important no matter how old you are and which stage of life you are at. However, the key to retirement planning success is to start early and gain the benefit of the power of compounding.

To start with let me first explain why you should start planning for retirement at a very young age as the life expectancy at birth for males is 67 years and 71 years for females. With the advancement in technology life expectancy is likely to increase. You will have to fend for more number of years of post-retirement.

Secondly, with age come health problems. With health problems, come medical expenditure which may make a huge dent in your income post retirement. Failure here could lead you to liquidate (sell) your assets in order to meet such expenses. Remember your regular health insurance or mediclaims do not always suffice.

Today’s youth prefer not more than two children. With westernization coming in, the culture of joint family is changing. They prefer independence and stay away from their family.  Hence people have to develop a corpus to last them through their retirement without any help from family. With youngsters hopping jobs regularly they do not get the benefit of plans like super annuity and gratuity. Both of these require a certain number of working years spent in the service of a particular employer.

The ever-rising cost of your consumption basket especially the daily necessities, education, healthcare and other basic needs is a serious point of concern. You need to take into account inflation while calculating your retirement funds as well as your expenses

While this may not be possible thinking about your retirement planning when young is. It is not necessary to start with a bang. You can start with small amounts and increase it as your salary increases. Also, if you start early and you have time with you, you can gain an advantage of high returns and maximize your investments by investing in equities or equity mutual funds.

Planning for your retirement is an ongoing process. It requires discipline, self-study and time. The earlier you start the better it is as you can gain from the power of compounding as well as aim for a higher return.

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