When to start retirement planning ?
Either when you have started your career ? or when you got married ?
After marriage your financial knowledge will come into forefront, as you need to manage wide things. Either you can try to manage everything by yourself. I mean either husband or wife separately. Also as both are responsible for each other life, it is good to be accountable with retirement planning.
Most of the people who worked in Government office were able to retire with pension and there is no burden of money shortage to an extent. My grand mother still receives pension of 14000 now. Though my grand father retired in 1985 and he died in 2010.
As the population got older the burden for Government too started rising and in 2004 they said that there wont be pension from Government. Whatever is saved during working time will be provided from EPF account. As an Employee you need to save 12% of the basic pay and it is mandatory. Along with this Employer will start contributing the same amount. This is done for your retirement benefits.
Before the boom of IT companies, it was normal to work in same company for years together and even retiring in the same company. Now changing jobs became easier. Along with this you may withdraw your EPF contribution as well. This reduces the retirement corpus.
So apart from your EPF, you also needs to plan for your retirement right now.
9 Reasons to start Retirement planning now :
I have listed 9 reasons why you have to start retirement planning now,
- Find Why
- Start for yourself
- Money needs time
- Monthly expense
- Work forever
- cost of delayed Investment
- Bucketlist items
- Health emergency
- Don’t be a burden
Find Why ?
It is good to start your retirement planning when you are young. At 30’s and 40’s it is easy for you to allocate money for retirement planning.
And the most important reason is you need to start retirement planning for yourself. Yes, there wont be any pension for even Government employees for those who joined after 2004.
Average living age of Indians were 37 during 1947. This average living age has increased to 70 in 2020. So you need to have money during your retirement at least for 10 years and maximum till your 90’s and 100.
Advanced medical facilities along with taking care of health can help in living beyond your thoughts. All you need is money to live happily during retirement period.
Start for Yourself :
This is going to be in continuation of last point.
In the current generation, you can earn at any age if you are good enough in certain things. Life is uncertain. Just think about ‘Ant’ which save for the rainy day. All the summer it saves food for the rainy day.
Even for us, you can divide the entire living time into 3 stages. First stage where we are dependent on parent for studying.
Second stage of life is all about finding the feet and making a career. There might be exceptions where you might be really excellent in your life. Initial ten years will go just like that in this stage and after getting married, this is where you need to look at learning about savings and investment.
You cannot make mistake during this period with respect to money. As it will affect the next stage.
If you are an employee, self employed then it might be difficult to live in this third stage unless you have saved enough. If you are business owner and Investor then you can lead a happy life.
So you need to start planning for your retirement life as early as possible.
Money needs time :
Do you need what is the single most important thing in life to grow wealth ?
It is not money, it is time. If you have enough time you can earn more.
If you have enough time, you can start your investment early.
Then money compounding will start working in better way.
Had read an interesting story of Einstein. He had invested in stock market and in 2 years he was able to see his money grow. So he had withdrawn the entire money. After a year he had invested again in the same stock. In the next few years, this money was lost in stock market.
He had quoted “Money compounding as the 8th wonder of the world”.
Be on the positive side of money compounding so your money grows. On the other side, money compounding will make you to lose faster.
Monthly Expense :
This is the most important factor for starting your retirement planning at earlier age.
For any urban family of 4, the monthly average expense will be between 30000-50000. Depending on the salary and your lifestyle this might be on the higher side. This is for the family at the age of 30.
Average inflation rate in India in the last 30 years is around 7%.
Considering this average inflation at the age of 60, your monthly expense is going to be between 2.3 Lakhs to 3.8 Lakhs.
Let’s have an average monthly expense as 3 lakhs and for a year it is going to be 36 lakhs.
Say you live till 70 and then you should have corpus of 3.6 crores.
If you are living till 90 or 100, what amount you should hold for your retirement ? Please calculate yourself as it might be useful in making right investment.
Work Forever :
I know that this is going to show you a scary picture. You may be leading a happy life with your income and expenses. Looking at your retirement corpus need might give you a heart ache as well.
One easy way is to work forever. Not thinking about retiring by 60, will give you peace of mind.
Another way which you can do for retirement planning is to reduce your expenses. Do you think it is possible ?
You got used to Amazon Alexa or Siri, Iphone or one plus phones, Weekend outings, travelling once in a while, branded clothing, change of car or bike once in few years etc. Lifestyle expense is huge and this is going to huge in the future as well.
Only way to start your retirement planning in your 30’s is to look upon increase your savings. Once this saving is increased, you can look at increasing your investments in right products.
Cost of Delayed Investment :
The most important factor you need to which might delay your retirement planning in your 30’s and 40’s is the cost of delayed investment.
If you start investing 10,000 for 30 years at 12% returns this investment will return 3.08 crores.
Investing 10,000 for 25 years at 12% returns this investment will return 1.70 crores.
If you start investing 10,000 for 20 years at 12% returns this investment will return .92 crores.
Same investment amount, just look at the drastic change in returns even for as small as 5 years.You lose 50% of corpus if you delay by 5 years. (Total Investment made for 30 years is going to be 36 lakhs)
Let us consider increasing the investment amount by 5000 and you starting by the age of 35.
15,000 for 25 years at 12% returns this investment will return 2.55 crores.
(Total Investment made for 25 years is going to be 45 lakhs)
25,000 for 20 years at 12% returns this investment will return 2.30 crores.
(Total Investment made for 20 years is going to be 60 lakhs)
The above calculation clearly says that increasing the investment amount will be of no use. All money needs is time.
Bucket list items :
You may be leading a comfortable life till your 60 and want to let loose. I was attending one of the forum and started interacting with the person who just retired from Doordarshan channel. He was happy with his life till now and upon further enquiry on what he missed doing in his life till now.
His reply was, he wanted to start a business. He was not able to do till now.
I realised and understood that there may be so many things people want to do and they get stopped by so many commitments.
Here are the few bucket list items which i listed,
- A foreign trip
- Pilgrimage trip
- Sea side villa
- Travelling all around the world
- Farm house
- Starting a business
Keep adding your thing which you wanted to do for a very long time.
Health Emergency fund :
Emergency fund is needed to take care of any immediate emergency requirements. As you get older you need to have a corpus as a health emergency fund. This is purely to take care of your heath.
India became a diabetes head in the world. Along with the other lifestyle related diseases you may require money every month for taking care of our health itself.
On positive side, you may be in need of money for buying organic products to lead a healthy life. This will burn your pocket if you are not prepared for it.
It is good to hold a portion of your retirement planning corpus for health as well.
Don’t be a burden :
Unlike other countries in India we enjoy staying together. Though this is changing and got changed a lot in the last few decades.
One thing which you need to understand is that you should not be dependent on your kids or anyone. You should be having your own retirement corpus to take care of yourself and your partner.
I have listed 9 reasons to start retirement planning now so that you lead a happy retirement life.
Life isn’t a race, but those who start early can live happily now and thereafter
One of the best benefit of starting your retirement planning early is to live your life regret free. The habit of planning will be yours and this will help in planning in all areas of life. You will not only plan, but will also take action steps in achieving it.
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