When we talk of retirement, it has completely changed now, which used to happen in our parents or grandparents’ generations. Today’s youth does not want to continue a full-time job from 9 to 5 pm till the age of 60 or 65 years. For most people, this is a slow-moving process that takes place over a period of time. Retirement for other people is decided at the age of 50 or 55, after which a different plan is prepared with great care.
To make retirement as easy as possible, it needs to be planned in advance so that the corpus can be ready by the time of retirement. So by starting early, you can definitely raise a good amount for the retirement corpus. There are many advantages to starting planning early for retirement.
Benefit of compounding
The interest earned on the amount invested also increases by its compounding which greatly increases the investment corpus. Therefore, starting early, your retirement corpus will grow by a huge amount. Let us understand by an example.
Shilpa starts saving at the age of 25 with an annual savings of Rs 10,000, an 8% annualized return rate, a period of 35 years. With this, the total savings till the age of 60 years will be 3.5 lakh rupees. Shiva at the age of 35 years, with an annual savings of 15 thousand, 8 percent annual return rate and 25 years, the total savings will be Rs 3.75 lakh. This is the power of compounding. So if you start late with more amount, then you will get less amount on retirement.
No Employer Pension Plan
Today there is hardly any company that offers pension plans and even if they do, how many people stay in a job for a long time to be eligible. It is difficult to take advantage of super annuity and gratuity with changing jobs. Both of these things require a certain year of work with a particular employer.
Life expectancy increase
According to World Bank data, life expectancy in 2010 was 65.13 as compared to 61.61 in 2000 and 58.35 in 1990. Therefore, with increasing technology, medicines and standard of living, it also increases every year. For this, more years are needed after retirement. So to maintain the lifestyle, there should be more corpus in retirement income.
Inflation increases continuously and earlier luxury items like mobile phones have become necessary. For this, you have to look at inflation while calculating the retirement corpus and returns.
By- Deepak Yohannan, CEO, MyInsuranceClub
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