Retirement Planning
Most of us like to live in the present, so much so that we often ignore the future. Retirement planning gets pushed aside as something for later.
Retirement planning is urgent
Saving for retirement is a real and urgent need, more urgent than the latest phone, a new car or a grand vacation to Europe. It is too important, and takes too long, to leave until you're a few years from retiring. By then, it's often too late to build the corpus you need.
At EquityEdge Investments, our recommendation to clients is to start saving for retirement at an early stage of life.
Starting early helps in two ways
- It reduces pressure on your finances at a later stage
- It lets you aim for an ideal retirement, not a compromise
5 myths about retirement planning
Myth 1: "I'll start when I turn 40"
The power of compounding is a cliché because it's true: your money earns returns, and those returns earn returns too. Say you invest ₹2,000 a month from 25 to 35, then stop and let it grow. At an assumed 8% a year, it could be about ₹27 lakh by 60. Start at 35 instead, and you'd need ₹4,000 a month for 15 years to reach about ₹31 lakh: three times as much money (₹7.2 lakh vs ₹2.4 lakh). Start late, and you save more, for longer.
Myth 2: "Who's going to live that long?"
Thanks to advances in medicine, people are living longer than ever, and cures for many old-age ailments keep improving. But treatment and medicines are getting more expensive too. You're likely to live longer than you expect, and to spend more on healthcare. How will you pay for that?
Myth 3: "Inflation won't hurt my savings"
Inflation eats into what every rupee can buy. If you are 35 and spend ₹16,000 a month today, then at a steady 5% inflation you'll need about ₹54,000 a month at 60 just to keep the same standard of living.
Myth 4: "Technology gets cheaper, so I'll spend less"
Gadgets do get cheaper, but we keep upgrading: a newer phone, a bigger TV, a better car. This constant upgrading eats up a lot of money, and it isn't even counted in inflation. Plan for it, or choose things that last.
Myth 5: "I'll find work after I retire"
The world keeps demanding new skills. As we age, most of us find our experience valued less, and it gets harder to compete with younger people for work. Relying on post-retirement income is a risky plan.
How we can help
- Decide in how many years you expect to retire
- Identify your sources of income and expenses during retirement
- Estimate how much to save each year for this goal
- Review and compare the retirement income options available
- Review your investments periodically and recommend changes
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