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The Importance of a Retirement Plan in India

Retirement planning involves ascertaining your retirement income goals and taking steps to achieve them. While doing that, consider certain factors like near-future and long-term expenses, income sources, assets, and risks to implement a suitable savings programme. By estimating the future cash flow, you can figure out your retirement income using a pension calculator. Although retirement planning can be done lifelong, it must be started as early as possible.

Why Is It Important to Have a Retirement Plan in India?

  • By saving money for your retirement, you can use it to finance any uncertainties, wealth-wise or health-wise, in the distant future.
  • Your retirement income can help you cater to your family’s needs- from monthly expenses to education, especially if your loved ones are financially dependent on you.
  • You can use your retirement income to fulfil your wish to travel the world in the golden years of your life. It can help finance your travel expenses.
  • Most importantly, you won’t need to depend financially on anyone if you plan your retirement well.
  • The rate of inflation in India has already risen from 5.52% in 2021 to 6.08% in 2022. Having enough savings for the future can also help beat inflation. Research to learn about the projected inflation rates in India for the next few years. Consider their average and use the retirement calculator to determine how much to save.
  • You can pamper your loved ones and meet their demands. From funding for the grandchildren to purchasing gifts, you can financially help your family. All credits to adequate retirement funds.
  • Life expectancy of 60 is history today. As the quality of our lifestyle has changed, the average life expectancy has gone up. Therefore, you must save more money for the future. A retirement plan can help you achieve this.
  • You may not wish or be able to work for long. However, if you start retirement planning from early on, you can leave your workplace whenever you want. You need not keep working against your will or health.

When Should You Begin Retirement Planning?

There is no fixed age to start retirement planning. However, it’s best to start early to get more time for wealth accumulation. Consider beginning when your average work life is 30-35 years.

Here’s an example. At 25, Mr. Sen begins to plan for a retirement corpus of Rs 2,00,00,000. He will need that at 60 (i.e., after 35 years). By investing/saving just Rs 3,500 monthly in different investment avenues generating 12% p.a. returns, he will surpass his goal and save Rs 2,30,00,000. But if he begins saving at 30 (i.e., after 5 years), he can, by 60, accumulate Rs 1,20,00,000 only (almost half of Rs 2,30,00,000).

Thus, even a delay of just 5 years can make a big difference in the distant future. You can start retirement planning in your early 20s to accumulate enough wealth by your late 50s. Consider the investment tenure while using a pension calculator.

Ideally, try taking a high risk and be an aggressive early investor in the investment phase, lower your risk in the accumulation phase and enjoy the fruits in the withdrawal phase!

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