Invest early to secure your retirementby Divya Kapoor Finance Advisor
Retirement is that phase of your life when you have no active or reliable source of income, and yet you need funds to live your life properly. Since retirement marks an absence of funds, people save their money to build up a retirement corpus, which would help them meet their lifestyle expenses in retirement. This fund is built when individuals are working and have disposable income. The fund should be built in such a manner that the corpus would be sufficient to take care of the expenses which would incur post-retirement after factoring in inflation. So, to build a good corpus, you need to start investing at the right time. What is the right time?
The right time to start planning a retirement fund is as soon as possible. There are two main reasons which stress the importance of starting early when it comes to retirement planning. These reasons are as follows –
You can get high compound interest
The interest which you earn on investments done for your retirement provides compounded returns. These returns have the power to multiply your corpus manifold when you give it time. Long term investment avenues, therefore, offer better returns than short term ones. When you start early, you can invest in long term avenues because retirement would be a long time off. As you give your retirement funds time to grow, your corpus would increase due to the compound interest, and you would have a sufficient retirement corpus at your disposal.
You don’t have to save high amounts
The later that you start your retirement planning, the higher the amount you would have to set aside to create a sufficient corpus. Taking out substantial savings from your income for retirement might not be possible. Moreover, it would also impact the savings which you are doing for other life goals. Contrary to this, when you start investing early on, you need to save only limited amounts to build up a good corpus. Since you have a long investment period, to accumulate the same corpus, you require to save less if you start early compared to what you need when you delay your investments. Investing small, affordable amounts from an early age would, therefore, help you plan a substantial retirement corpus and that too without pinching your pockets.
Given these reasons, you should start early for creating a sufficient corpus for your retirement. When investing, however, the following points should be kept in mind –
Be disciplined in your investments. If you are haphazard and random, you wouldn’t be able to save sufficiently
Always plan your investments on their tax implications. Choose tax -efficient saving avenues, like fixed deposit, which would give you tax-free benefits on retirement
Have a healthy mix of equity and debt investments for a well-balanced a financial portfolio which would give you the maximum returns without unnecessary risks. Choose mutual funds, gold, real estate, fixed deposits, etc. as investment avenues but in a balanced manner.
Don’t withdraw from your retirement corpus before retirement. Avoid the urge of premature withdrawals to sustain the corpus till retirement
Retirement planning should, therefore, start as soon as possible if you want to create a substantial corpus with small investments done regularly over a long period.
Created on Jul 12th 2019 08:22. Viewed 51 times.