Follow real-time updates on Union Budget 2023Catch exclusive videos on Union Budget 2023 from CNBC-TV18
Retirement planning: The key to a successful retirement life lies in creating a retirement corpus right from a young age, to deal with future cost of living, inflation and healthcare costs.
If you are young now, retirement may seem a distant thing to worry about. However, it’s important to start planning your retirement early so that you have a steady stream of money during the winter of your life. No matter what your ideal retirement looks like, it will need money.
Recommended ArticlesView All
This Microsoft project is enabling the digital presence of low-resource languages
Jan 30, 2023 IST7 Min(s) Read
CEOs, CXOs may see 9.1% salary hike, focus on performance-linked pay: Survey
Jan 30, 2023 IST4 Min(s) Read
Wizards of the Street | Cash is a depreciating asset and an opportunity, says Vijay Kedia
Jan 30, 2023 IST2 Min(s) Read
Prakash Javadekar — Challenging task in hand as Kerala in-charge of BJP
Jan 30, 2023 IST8 Min(s) Read
For starters, when is the right time to start planning your retirement?
Investing in retirement is a matter of timing — the earlier you start, the more you can save. In addition to changing priorities with age, your values also change, said Abhinav Angirish, Founder, Investonline.in while talking to CNBC-TV18.com.
What should you consider while planning it?
According to Angirish, you must factor in the future cost of living, inflation and healthcare costs.
"It is not about quantity, but about "quality" and what you will need in the future. There are advantages and disadvantages to retirement planning. You must make a wise choice. Additionally, taking an age-wise approach to retirement planning will help you make the most of your retirement," he said.
Now, let's look at the age-wise approach:
When you are in your 20s
The best time to start planning for retirement is in your twenties. Although you may wish to enjoy your life at the moment, saving now will help you build a substantial corpus when you retire.
The advantage of starting early is that you can start with a small amount, by the time you decide to increase the amount; the investment value will have increased. It is important to start early when it comes to saving for the future, Angirish told CNBC-TV18.com.
When you are in your 30s
You have reached the point of maturity by now. In addition to being more responsible to yourself, you are also more responsible towards your family.
"The stable job will make it easier for you to plan a corpus without worrying about the income. In addition, the longer the investment term, the more interest you will earn and more money you will save," Angirish said.
When you are in your 40s
Experts concur that it is a good place to begin your retirement planning. There are still two decades for you to build a substantial sum for your future needs.
(Source: RBI. This graph shows the position of individuals regarding retirement planning. The data belongs to the wave of the ICE 360 Degrees National Household Survey)
"The primary burden in your 40s, however, is your current financial situation. You might be concerned about your child's education, your parents' health, or even your own needs. This period of time will require you to be more conservative in your approach to saving. Keep your limits in mind so that you do not overstretch yourself. In the meantime, you should save a little bit to build up your future corpus instead of spending it all now," according to Angirish.
When you are in your 50s
There is no better time than now. It is never too late to start saving for retirement. It will be more important for you to be aggressive with your saving. The reason you can do all this is that you may not have major financial obligations, so you can take out a substantial amount of your earnings and save them. It might be a good idea to look for consultant opportunities at places where you can delineate some income for your retirement.
And, where should you invest for retirement?
National Pension System (NPS)
NPS is a government scheme that provides social security to the working class. Under this scheme, you can invest in a pension account at regular intervals. Once you retire, you can withdraw a certain amount of the corpus while the remaining sum will be paid out as monthly pension.
Public Provident Fund (PPF)
Investing in PPF is another way of planning your retirement as it offers an attractive rate of return. PPF offers an EEE (Exempt-Exempt-Exempt) tax status. The maturity amount and the overall interest earned during the period of investment are tax-free. It has a lock-in period of 15 years.
Mutual funds are one of the private schemes to plan your retirement. It can help you in earning decent returns. Also, when you invest with a long-term horizon, you will enjoy the benefits of power of compounding.
According to experts, you should invest more in equity funds when you are young and then switch to debt funds as you near your retirement.
Bank deposits such as recurring deposit (RD) and fixed deposit (FD) are also decent modes of investments. If you start early in these, you could accumulate a significant sum by the time you retire.
What is the bottom line?
The bottom line is that by developing the habit of saving early, you don't have to push yourself to the end of your retirement.
Note To Readers
CNBCTV18.com advises users to check with certified experts before taking any investment decisions.