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What is the right time to start planning for retirement?

Planning for your golden years early on is very important, especially to remain independent and maintain the same lifestyle. Here's when you should start planning for a retirement.

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Are you entitled to a fixed pension from your employer upon retirement? The answer is most likely going to be in the negative. Gone are the days when retirement planning was construed the an image of a person playing with his grandchild and someone who has worked till they are 60 years old. These days, things are pretty flexible, with more and more people opting for an early voluntary retirement. Which means, if you're someone who is looking to retire from a day job by the time you're 45 to 50, there's a significant amount of life left after that, where you'd want to indulge in other passions, along with maintaining the lifestyle you've had so far.

This is the reason retirement planning is so important.

In the first part of the “How to plan for your retirement” series, we will go through what the process entails, and the right time to start saving up for your golden years is.

What does retirement planning really mean?

First things first, retirement planning does not only entail the financial products that you're going to invest in for a comfortable rest-of-the-life, rather it also includes a well-laid plan, in terms of exactly what you want to do after retiring. 

Retirement is a drastic life change, both economically and emotionally.

Once you have the broader plan in place about things you want to persue or places you want to travel, the financial angle comes in. It is according to this broader plan, you can decide the next step, ie financial planning.

It is important to note that retirement planning in India isn't a smooth job at all. There are many factors to consider like, higher inflation rate, slowing economic growth, and, of course, different financial products.

Given the fact that the process isn't going to be smooth, the next natural question will be: When should I start thinking about retirement planning?

The vital years to plan for retirement:

30s - Right time to plan

The 30s are the right time to start thinking and planning for your golden years. Start reviewing your earning capacity and take a stock of your future goals, and make a note of all your debts, savings and expenses lying ahead.

This is the time you'll need to get realistic about the aforementioned things. If you are in your 30s, you'll have enough time to plan your retirement in a better and cheaper way.

40s - Not the best time, but it’s a wake up call!

If you 're in your 40s, it's definitely late, but you still have time to put a retirement plan together.

With changing lifestyles and priorities, it is safe to assume that a lot of people may not work till they are 60. Nowadays, a lot of people don't want to work beyond the age of 45-50 years.

Which is why it is important to start planning and putting things into action right away, before it's too late.

The more you delay investment plans for retirement, you'll have that much less money. This may lead to disappointment because you may have to compromise on your lifestyle, going ahead.

50s – Far behind the retirement savings curve

Mayday! Your next financial journey now depends on how you well can manage to plan for the upcoming future in a short time. This is your final chance to design a proper retirement plan.

Hopefully, by now, you must be almost free from all your major expenses like mortgages/ loans or may be nearing the final payments. This is the last leg, and you must take immediate actions to plan for your future.

The Process

Retirement planning is not a herculean process if you start planning for from your 20s or 30s, where you're still in a position to take a good deal of risk.

In the next article, we will discuss the types of products you can invest in, to build a retirement corpus.

Till then, consider this: What will you do if you get Rs 100 crores today?

“Rishabh Parakh is a Chartered Accountant and the Chief Gardener & Founder Director of Money Plant Consulting, a leading Tax & Investment Planning Advisory Service Provider. He also runs a personal finance blog called “Mango Investor” aka AAM Niveshak at www.mangoinvestor.com. Readers are invited to send their feedback to rishabhparakh@moneyplantconsulting.net.”

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