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Retirement planning: Never too early to begin!

Henil Shah
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Retirement planning: Never too early to begin!

When it comes to retirement planning, people are quite ignorant. And this is largely due to the emotional factor. However, it is important to understand that like other financial goals, retirement planning is also important. In fact, retirement planning helps you to have financial independence during your golden years without a need to depend on anyone. In this article, we have listed a few reasons, which will help you understand why it is crucial to have a retirement plan in place. 

 

Change in social dynamics 

The changing social and economic environment is leading to the nuclearisation of families. In the past, societies used to have a joint family system, which is very rarely seen these days. In a joint family setup, the combined income of all the working individuals acted as an umbrella for all those who weren’t earning, including senior citizens. However, in nuclear family setups, senior citizens might have to depend on their retirement savings to meet their expenses. Though, we are lucky enough that our Indian culture is so rich that even if the children are running a nuclear family, they do take care of their parent’s financial needs. However, this indeed increases the financial burden on them due to higher education costs, higher medical costs, higher lifestyle expenses, etc. Therefore, for nuclear families, financial independence after retirement becomes the utmost priority. 

 

Working lives are turning shorter 

Working lives are turning shorter with students aspiring for higher education and professional certifications even prior to their first job. Moreover, many people these days are also planning for early retirement, attributed to a number of factors such as voluntary or involuntary retirements, health issues, to look after ailing family members, etc.  

Hence, due to such unforeseen emergencies that one may face in life, it makes more sense to begin retirement planning as soon as you get your first job. 

 

Inflation – the wealth killer 

Inflation is one of the major reasons why you should consider planning your retirement. This is because inflation slowly kills your wealth. Inflation reduces the purchasing power of money. Say, that currently your age is 30 years, and your expense stands at Rs 50,000 per month. Further adding to the assumption, you will be retiring when you turn 60 and for illustration purposes, let’s keep the inflation rate to 4 per cent (your personal rate of inflation would be quite higher). With all these assumptions, when you will turn 60, your monthly expense will be Rs 1.62 lakh. The story doesn’t end here! Even when you retire, still your expenses will continue to grow due to inflation. In this example, when you will turn 70, your monthly expenses will be Rs 2.4 lakh. This means that, when you turn 70, considering minimal or no regular income, you would need expenses worth Rs 2.4 lakh per month.

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