help plan for retirement and offer the security of insurance.
Retirement is a time when people look forward to live their life the way they always wanted. Life expectancy of people in India is growing and most people are quite healthy when they retire so they look forward to lead an active life. They want to engage in leisure activities and hobbies they were not able to pursue earlier as they were too engrossed with their daily responsibilities. However, to be able to follow one’s desires and dreams in retirement it is required that retirees or senior citizens have enough income at their disposal. This is possible only if senior citizens have properly strategized for their retirement while being young and had invested in a pension plan..
If you want to enjoy your retirement life it is important that you start planning for retirement early. Ideally you should start saving for retirement from the day you start earning. When people begin earning they are so excited about fulfilling their pent up desires and needs that they either ignore or don’t even realize the need to save for retirement. Unfortunately, most people realize that they need to save for retirement when it is too late.
The strategy for retirement planning is to start as early as possible and don’t shy away even if the amount of savings that you can make then is only miniscule. The most important benefit of starting early is that the money you save earns compounded interest or return for a larger duration. This would ensure that even a small amount invested now will become a meaningful sum when you reach retirement.
There are insurance companies which offer retirement plans that will help you invest your savings productively. The entry age for most retirement plans is 18 years. So basically you have the opportunity to start as early as when you are just 18 years.
The later you start investing the more difficult it will become for you to reach your targeted retirement corpus. For accumulating the same retirement corpus, the amount of money that you need to save every year would be significantly higher if you start late. Say if you are 22 years old today and if you save Rs 15000 today it will multiply with time and when you reach retirement it would be about 15,00,000 then (assuming a 13 percent annual return). Thus your money is multiplied 100 times.
If you invest the same amount (INR 15000) when you are 35 years old the amount of money that you will generate when you retirement age would be a meager INR 1.5 lakh (assuming a 9 percent rate of return). In this case your money will multiply only 10 times as it gets compounded over a period of 25 years and will also earn lower rate of return than you can potentially earn when you start early. I assume a lower return because your ability to take Risk is lower when the investment horizon is lesser. When you start early the retirement plan can invest your retirement savings more aggressively in asset class like equities which promise a significantly higher rate of return over a longer investment horizon. But when the number of years to go for retirement is relatively less retirement plans tend to get conservative and invest more in debt than equities.