Over the years, retirement planning hasn’t seen much change. You work, save and retire. However, today’s generation is facing certain challenges which the previous generations didn’t have to fret about. Mainly, life expectancy is longer, meaning you will need more funds for your post retirement days. And, to ensure you have enough funds, it is beneficial to start saving earlier1.
Like all of life’s plans, retirement planning also requires time, effort and research. The sooner you understand the components of retirement planning, the better it would be for you. Take a look at the benefits you can enjoy when you plan for your retirement early in life:
1. Starting early is easier
When you get your first job, retirement may be the last thing on your mind, but making hay while the sun shines is important. Start investing as soon as you can so that you can save for a long period. As you grow old, your responsibilities would also increase, so make good use of this time and start planning today.
2. You can reap the fruits of compounding
When you save for a long, you get more opportunities to get higher returns on your investments. The power of compounding can do wonders for even the smallest investments. Keep setting aside whatever you can to accumulate better interest on your savings. You would be able to build a much bigger corpus as compared to someone who starts saving five or ten years later than you.
3. You have the freedom to be flexible
When you start early, you have the liberty to be more flexible as well as aggressive in your investments. In many cases, higher risk brings higher returns, and only when you have the right cushion would you be able to make bolder decisions, be it related to any investment avenue.
4. Tax benefits
Retirement plans can also help you save on your income tax. Premiums paid towards retirement plans are tax deductible under Section 80CCC of the Income Tax Act of 1961, subject to satisfaction of conditions stated therein2.
5. You have the backup to deal with emergencies
Any financial commitment or medical urgency can dig deep into your savings. A nest egg or a substantial corpus would help you overcome such an emergency. When you start saving early on, you would be in a better position to deal with such situations and not land into a financial crunch.
6. Peace of Mind
The essence behind planning and being prepared is to get peace of mind. When you are certain that your future is financially secure, you can enjoy your present all the more. With the suitable investment plan, you would be able to achieve your long-term life goals and spend your second innings in a comfortable way.
There are people today who take retirement planning very seriously. There are also many who wish to go for an early retirement. Being financially independent even without a regular salary is key to retiring at the age you wish, and it can happen only when you carefully plan it from the beginning. Keep in mind that financial independence and financial literacy go hand in hand. When you plan your retirement you need to factor in a lot of things, and yet be prepared for everything unexpected that life brings to you.