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We make several decisions in life that have a substantial impact, maybe sooner or in the later years. WE make carefully calculated investment decisions regarding our family's needs but may forget to prioritize our requirements. It is essential to consider the benefits of retirement planning at the right time in life to secure your future.
Why Should You Plan for Retirement at an Early Age?
Saving enough for your future is a crucial part of your financial plan when you have a stable income source. The retirement planning benefits may not be a primary concern for you as that stage of life seems years away. However, the important thing to note here is that the benefits of retirement planning are more optimum if you start early.
There are several benefits of retirement planning early in life that you must not overlook. You can develop a habit of saving your money efficiently for the future when you have a clear idea of the objective. In your younger years, it is understandable that you may want to spend more than save. Nonetheless, in the longer run, the benefits of retirement planning will help put everything in perspective.
One of the primary advantages of retirement planning in younger years is that it allows you to spread the savings over a more extended period. That way, you do not get overwhelmed by the financial burden of saving quickly as you near the age of retirement.
Another early retirement planning benefit is that you can choose your age of retirement, as per your convenience. When you have enough to go on, you can decide when you take a break from the financial responsibilities of life. Hence, it is better to set a plan in motion as early as possible to reap the benefits of retirement planning as expected.
Top 10 Benefits of Retirement Planning
Planning early in life certainly has its advantages, but you may wonder what are the benefits of retirement, apart from the points mentioned above. Let's discuss some important benefits of retirement planning in detail to get a clearer picture.
1. Financial Backup for Emergencies
When you are no longer working, the unpredictability of life can be frightening. Preparation for such situations is one of the crucial benefits of retirement planning. By securing a sizeable corpus for your retirement, you can ensure that you and your partner remain protected during financial emergencies
Such benefits of retirement planning also allow you to head into the golden years of life with dignity. In the face of a crisis, you can depend on the savings to meet life demands.
2. Returns on Investment
Investing in a retirement plan instrument can help you save and grow your money over time. Depending on your financial profile, you must decide which investment tool is more suitable for you. The returns from such an investment will be better when you plan them at the right time.
You can fulfill the financial expectations appropriately by calculating the required savings amount. As a consequence, you can enhance the benefits of retirement planning in terms of the returns.
3. Tax Benefits
Today, several financial instruments are available to create a sound retirement plan for you and your partner. When you choose to invest in a suitable plan, it enables you to reduce your taxable income, as per the prevailing tax laws.
It can be a relief on your income source while you also secure a fund for the future. Also, the tax benefits of retirement planning enable you to manage your investment expenses more effectively.
4. Cost Savings
The cost of retirement planning can be reduced in various ways. When you envision the retirement planning benefits for yourself at a younger age, you can begin investing earlier. Any long-term investment plan is more fruitful when you give it the required time.
Furthermore, a younger and healthier individual can enjoy the benefits of retirement planning at lower premium rates. Whereas, if you invest later in life, it increases related risks and decreases the period of investment, resulting in higher costs.
5. Peace of Mind/Financial Independence
One of the benefits of retirement planning that we often ignore is the peace of mind that it brings.
4. Cost Savings
The cost of retirement planning can be reduced in various ways. When you envision the retirement planning benefits for yourself at a younger age, you can begin investing earlier. Any long-term investment plan is more fruitful when you give it the required time.
Furthermore, a younger and healthier individual can enjoy the benefits of retirement planning at lower premium rates. Whereas, if you invest later in life, it increases related risks and decreases the period of investment, resulting in higher costs.
5. Peace of Mind/Financial Independence
One of the benefits of retirement planning that we often ignore is the peace of mind that it brings.
Having a strong investment portfolio will give you the confidence to step into a new life phase without worry.
The older you get, the need for financial support becomes more apparent. With the benefits of retirement planning tools, you can enjoy financial independence without compromising your dreams.
6. Inflation
With time, the cost of living and value of money is going to evolve. Every day, it becomes a little more expensive to maintain your lifestyle. It can be challenging to fulfill the financial expectations of life in the future when you have retired from your job.
Fortunately, the benefits of retirement planning include fighting inflation rates. As an investor, you must consider this while making investment decisions in the present to have enough for the future.
7. Source of income for Private Sector Employees with No Pension
If you are working in the private sector with no provision for pension, consider the benefits of retirement planning on your own. You can choose the investment vehicles to save your earnings on your terms for retirement.
When the time comes, the retirement planning benefits will replace income and provide a comfortable lifestyle for you.
8. Legacy Opportunities
When you imagine your life goals post-retirement, it can look completely different from now. Your priorities may go through a transformation with age and time. Among the benefits of retirement planning, the legacy opportunity is one that can cover such possibilities.
You can leave behind a large sum of money for your heirs or for a charitable cause that you prefer. Hence, begin planning early for retirement to save as much as you can and assign it as per your wishes in the future.
9. Early Retirement Option
Living a life full of responsibilities can take its toll on a person.
8. Legacy Opportunities
When you imagine your life goals post-retirement, it can look completely different from now. Your priorities may go through a transformation with age and time. Among the benefits of retirement planning, the legacy opportunity is one that can cover such possibilities.
You can leave behind a large sum of money for your heirs or for a charitable cause that you prefer. Hence, begin planning early for retirement to save as much as you can and assign it as per your wishes in the future.
9. Early Retirement Option
Living a life full of responsibilities can take its toll on a person.
You may not want to wait till a certain age to retire from your job. Compiling the benefits of retirement planning earlier in life can be incredibly useful in such a situation.
If you wish to retire earlier in life, you can rest assured that the retirement planning benefits will cover your needs.
10. Protection of Assets and Property
Retirement may seem like many years down the line, but it may not be as far as you think. If you wait several years before planning for retirement, you may not have enough time to do it well.
Many people resort to selling their properties and assets to meet life's expenses after retirement. You can eliminate the need for that by preparing an investment plan at a younger age, thereby acquiring the maximum benefits of retirement planning.
How to Choose a Suitable Retirement Plan?
Here are some critical things to remember to get the maximum benefits of retirement planning:
1. Understand Your Needs
You may believe that expenses after retirement will be much lesser than the present. However, owing to the increased life expectancy[1] and improved living standard, that may not be the case.
With realistic expectations, you can begin investing accordingly and get better benefits of retirement planning. It is in your best interest to map the financial requirements based on the dependents after retirement, lifestyle needs, and personal goals.
2. Determine Time Frame
Your age when you begin retirement planning and the expected age for retirement sets the framework for choosing investment opportunities. It is preferable to have a longer gap between these two stages to withstand higher risks and improve the benefits of retirement planning.
3. Prepare Investment Goals
Once you have established a time frame for your investments, the next step is to determine the objective behind it. Ask yourself whether you require the benefits of retirement planning to be the primary source of income or an extra layer of protection.
This will allow you to determine how much money you need post-retirement and use the right investment vehicle for it.
Frequently Asked Questions (FAQs)
Q. Can I Meet Health Expenses With A Retirement Plan?
A. If you consider the future healthcare costs while making investment decisions, you can adjust the amount accordingly. The returns from the investment will be adequate for medical expenses in the future.
Q. How Much Should I Invest For Retirement?
A. The amount of money that you should invest for retirement depends on personal factors such as expected retirement age, lifestyle demands, dependents, and health condition. Also, remember to make inflation-adjusted investments so that the returns are sufficient.
Q. Should I Start Saving For Retirement When I Start Earning?
A. It is advisable to start saving for retirement as early in life as possible or when you have a stable income source. It will be beneficial for you to save a portion of your income when you start earning.
Q. Do I Need A Retirement Plan If I Have An EPF?
A. While the Employees' Provident Fund can help secure a corpus for the future, it may not be enough. An additional layer of financial protection will give you the confidence to retire comfortably.
Q. What Is A PPF?
A. PPF is a Public Provident Fund, a government-supported savings scheme for people from all sectors, be it employed, self-employed, and unemployed.
Sources:
[1] https://niti.gov.in/content/life-expectancy
https://pensionersportal.gov.in/retire-benefit.asp
https://m.rbi.org.in/Scripts/FAQView.aspx?Id=68
ARN No: Dec21/Bg/11
