Retirement planning in this era is important for individuals working in either government or private sector. In the 80s and 90s, most of the jobs in India were created by the government sector and those jobs included pension benefits. The government jobs created after 2004 no longer offer pension benefits.

The pension benefits offered by the government and private sectors are defined contribution plans(DCP). In this plan, the employer and employees contribute to the pension accounts, which are then invested into the market. The final retirement benefit depends on the account balance at the time of retirement which depends on the market fluctuations and investment performance. In case, the year you retire in has a bad market timing, you may end up getting a smaller retirement amount than you were expecting.

Therefore, well-structured, disciplined, and early retirement planning is essential. Here’s why:

No pension for most private sector employees: With the majority of private sector jobs that don’t offer pension benefits, employees need to rely entirely on personal savings and investments for their post-retirement income. Early planning allows you to build enough amount until retirement to cover your needs without relying on external financial support.

Longer Life Expectancy: Due to medical advancements, life expectancy in India has increased significantly, with people living into their 70s and beyond. As life expectancy rises, so does the need for a larger retirement fund that can support an extended to a period of 20 to 30 years after retirement.

The Power of Compounding: Investing early gives your money more time to grow through the power of compounding. Compound interest allows your investments to generate earnings on both the principal and accumulated interest, leading to exponential growth over time. A delay in starting can significantly reduce your retirement savings due to the lost opportunity for compounding.

Mitigating Inflation Impact: Inflation erodes purchasing power over time, making goods and services more expensive. Planning early allows you to invest in options that offer inflation-beating returns, such as equity. Starting early ensures you are better prepared to handle the rising costs of living, healthcare, and other expenses in the future.

Increased financial security and less stress: Early retirement planning provides financial security, reducing the stress and uncertainty of managing finances in old age. Having a well-prepared retirement fund allows you to focus on enjoying your post-retirement years rather than worrying about meeting basic living expenses or covering unexpected costs, like healthcare.

Today is always the best time to start investing. With the growing Indian economy, this is an ideal time to invest in equity funds. These investments have the potential to generate attractive returns over the medium to long term. Starting early allows your retirement savings more time to compound, helping to create a large retirement fund with limited initial resources.

Delaying retirement planning means missing out on these growth years, leaving you with insufficient time to accumulate and grow your wealth for the future. Take time to plan for your retirement, and speak with your financial advisor or the team of Investment Experts for the best investment options for your retirement planning. The sooner you start, the more relaxed your retirement years will be.