Retirement is among the major goals for which it takes proper financial planning. After retiring, you lose your primary source of income and therefore, you must have built a significant corpus by that time to support you financially during your golden years. Indians must take retirement planning more seriously because around 62.5% of the working population in India belongs to the age group of 15-59.
But people often disregard or delay retirement planning until it’s too late. Practical planning by starting to invest in a good pension plan early is needed to maintain a decent lifestyle after your working years. Here, the question of when to begin comes. Read on to know about it.
Why Should You Start Planning for Your Retirement Early?
If you delay starting retirement planning, you can have the following consequences:
- A loss of market-linked investment returns
- A loss of tax benefits during your working years
- Higher premium amounts
- Missing the opportunity of an early retirement
To avoid these consequences, it is crucial to start investing in a pension plan early. The more time you invest to save for the future, the higher the corpus you likely generate due to the power of compounding. A pension calculator will show you the same.
When Is the Ideal Time to Begin Retirement Planning?
The right time to start retirement planning is during your 20s or 30s. This is because when you are young, you usually have fewer financial responsibilities. This allows you to invest or save more for your future. Therefore, you can afford to take a higher risk and invest in potentially profitable instruments.
Although the equity market is often erratic in the short run, the risk is expected to balance with the returns generated in the long run which outdo inflation. So, if you are in your 20s-30s, you can begin to invest in a pension plan that has the potential to reap good returns in the long term.
What to Do If You Start Planning Late?
Say, you want to retire by the age of 50. If you start planning in your 30s, the pension calculator will show that you can get lower returns than if you begin to plan in your 20s. However, if you have started late, there’s no cause for freaking out.
In this case, you should change your investing strategy since you are nearing your retirement. Consider risk mitigation in late-stage planning. That is, you can focus more on preserving your capital than on appreciating your wealth aggressively.
Slowly, consider reducing your exposure to risky assets like equities and increase your exposure to fixed-income avenues. Thus, by the time you stop working altogether, you will likely have a stable source of secondary income to substitute your primary income.
Consider investing in a suitable pension plan from a leading insurance provider in India. Keep in mind any needs that you may have to look for suitable benefits. If you can’t afford to keep paying premiums, look for a plan that comes with a limited premium paying period or involves a one-time payment.