Why is Retirement Planning important even in your 20s and 50s

Mindset in the Early 20s – 

Why should I plan for Retirement?

The Early Bird Gets the Nest Egg

Imagine your 20s: full of energy, dreams, and a paycheck that barely covers your avocado toast addiction. Retirement seems like a distant mirage, right? Here’s the kicker: this is the perfect time to start building your financial future.

Meet Ram and Shyam. Ram started investing Rs. 10,000 a month into a mutual fund at age 25. Shyam, on the other hand, thought he had time and started at 35. By the time they both hit 60, Arjun has a whopping Rs. 4.89 crore, while Shyam struggles with Rs. 1.57 crore. The difference? Compound interest over time – your 20s are prime for this magic!

Growing old is inevitable. During your entire earnings age, you would have expenses for your home, children, children’s education and marriage, maybe elderly parents and then all the luxuries in life - dream home, dream car and dream travel.

To secure your future, investing early, and investing regularly from your salary – a Systematic Investment Plan (SIP) can provide the required fuel to achieve your goals. Starting early gives a head start to your investment’s compounding potential by cutting through the short-term volatility in markets, benefitting investors in the long run.

Delay of 10 years - Reduction in the value of investment by 3.31 crore!

If Shyam wants to achieve Ram’s final corpus in 25 years, he would have to invest over thrice the amount every month – ₹31,370!

So, why hold yourself back from thinking long term? Start planning at the onset for a smoother life after retirement!

Here are some common myths about retirement planning for people aged between 40-55 years old, along with the realities:

Myth #1: "It's too late to start saving for retirement."

Reality: It's never too late! Think of it as showing up fashionably late to a party—you can still have a great time (and save money) once you arrive.

Myth #2: "I don't need professional help; I can handle it myself."

Reality: DIY retirement planning is like assembling IKEA furniture without instructions. Sure, it’s possible, but a pro can save you a lot of headaches (and missing screws).

Myth #3: "Investing in the stock market is too risky at my age."

Reality: Avoiding the stock market completely is like saying you’ll never cross the street because of traffic. With the right strategy, you can cross safely and reach your financial destination.

Myth #4: "I don't need to worry about inflation."

Reality: Ignoring inflation is like thinking a flat tire won’t slow you down. It can deflate your savings—keep your investments in tip-top shape to stay on track.

By debunking these myths and taking proactive steps, you can better prepare for a comfortable and secure retirement. Remember, it’s never too late to start planning and making smart financial decisions.

If you are already near retirement, you should be investing much more in SIP because each penny counts.

Remember: Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.

Warm regards,

Tejas Lakhani, Chartered Accountant and Finance Professional