We all want to have comfortable and peaceful retirement life. Still, the biggest worry in the back of our minds is running out of money in sunset years with no source of income to support our daily needs.
Consider this: Max Life Insurance’s India Retirement Index Study reveals 9 of 10 urban Indians worry about their savings not lasting through retirement. The question remains why we keep procrastinating savings for our retirement. There are several factors ranging from the thought process of living to the fullest today rather than saving from tomorrow to priority being given to immediate goals such as going for a vacation. The reason could be anything but delaying retirement planning could just add up to your burden, as the more you wait, the more aggressively you will have to save.
For example, if you are a 20-year-old earner and want a corpus of Rs 5 crore at 60, you would need to save only Rs 4,250 monthly for the next 40 years, assuming the rate of return of 12 per cent. However, if you are 50 and have missed the bus of starting early but still want to save Rs 5 crore till retirement then you need to save Rs 2.17 lakh each month in the next 10 years.
Clearly, early starters have the benefit of compounding working to their advantage as it gives your money more time to grow. For example, if you start saving Rs 4,250 per month at the age of 30, it will accumulate to only Rs 1.48 crore. The 10 years of compounding can give you an edge of over Rs 3 crore.
“The most common mistake investors make is not to set their quantified retirement age and corpus at an early age. They plan for their retirement after turning 35, which is not the right habit.
Each investor should plan for retirement from their first job at around 22 years of age and build a long-term portfolio with the multiplier benefit of compounding. Both discussed individuals will have a significant difference in their retirement corpus, even if they invest the same amount of money, that too in the same product, due to the higher power of compounding for the additional 13 years in the second person’s case,” Amit Jain, Chief Executive and Co-founder of Ashika Wealth Advisors told Business Today.
Most importantly, financially stress-free retirement is not about attaining some ballpark figure of Rs 1 or Rs 5 crore. The procedure to arrive at your retirement corpus must be in tune with your needs and lifestyle and the number of years left for retirement. Once you have these variables in place you can plan better your sunset years.