If it is possible start the retirement planning the day you start the career,sounds crazy but worth evaluating this thought. In more structured manner,there are two stages of retirement planning once you have started to earn and become financially self-dependent.
1. Accumulation stage.
2. Distribution stage.
Accumulation stage: This is time of your life when you are earning. You have source of income either from job or business. This is the time when you can set aside something for future, you basically accumulate wealth.
Distribution stage: This is the time when you are dependent on your accumulated wealth.The distribution refers to distribution of the accumulated corpus over the retired life through withdrawal or interest income.
Start early: It’s never too late to start the retirement planning but the sooner you start the better. At young age you have longer period to contribute towards your retirement corpus, assuming retirement age of 60. If you start at say 30 year of age, your investment gets enough time to give you compounding benefit. At young age one can also invest in high risk instruments to get faster growth and if the investment value comes down one has enough time at hand to let investment recover on its own.
On the other hand, if you start at the age of 45 you have only 15 years to plan and you may have to set aside large sums to reach desired corpus.You cannot invest in high growth assets because you cannot take risk and do not have enough time at hand for investment to recover in case it takes a temporary dip.
For example, if you are 25 years old and want to accumulate ₹1cr at the age of 60 years you can achieve that by doing SIP of as low as ₹1600 per month assuming 12% return. But if you are 45 years of age then you need to invest₹20,000 pm to reach ₹1cr at 60 years.
Of course, these are not comparable in terms of purchasing power,having ₹1cr in 35 years’ time has lower value than having ₹1cr in 15 years’time. But the idea is that small amount gets accumulated to a large sum if youstart early.
Uncertainty: The official retirement age is 60 years, 20 years ago one can imagine majority of working population hitting 60 years before they hang up their boots. But today are we looking at average retirement age of 60 years?With increasing young population coming into workforce, increasing number of start-ups disrupting the established business models and machines replacing human tasks if you are expecting to work till the age of 60 years you are in for a surprise. Today one should look at 50 years as the retirement age when you are easily replaceable and this age will definitely come down 10 years from now. So we face this uncertainty on the retirement age and time to retire. So if at the age of 35 you thought you had 25 years to accumulate your retirement corpus, then it may not be so.
#StartRetirementPlanning #FinancialPlanning #WealthBuilding #RetirementSavings #SmartInvesting #SecureFuture #FinancialFreedom #RetirementPreparation #RetirementGoals #EarlyRetirement