You may have heard the adage, ‘failing to plan is planning to fail.’ This perfectly applies to financial planning. Whether you are a salaried employee, an entrepreneur or a self-employed professional, retirement is inevitable. Sooner or later, you will reach retirement day. So why not plan for it right now?
Planning for your retirement at a young age will give you peace of mind knowing that you have the time benefit to build a larger corpus that you can use in your golden years to live the life you always wanted for yourself. Also, if you have enough funds to take care of your needs, you may even take an early retirement.
Let us look at the benefits of early planning and the benefit of investing in a retirement plan.
Utilise the power of compounding
The great Albert Einstein once said, ‘compound interest is the eighth wonder of the world.’ There are many investment schemes that allow you to grow your corpus with compound interest effects.
In compound interest, you earn interest on the capital amount as well as the interest you earned in the previous year. When you start investing in such a scheme from an early age, you can build a larger corpus with the magic of compounding.
You can take an aggressive investment approach
When you are young, in your 20s or early 30s, you may not have too many financial responsibilities and financial dependents. This means, you can afford to be more aggressive in your investment and invest a major sum of the investable amount in equity funds or equity-related securities.
Although the risk is high, it also has high rewards potential. Also, historically, such funds are known to provide valuable returns in the long run. So, if you stay invested for a longer period, you have better chances of earning a sizeable corpus for the future.
As you approach your old age, you can shift your investments to debt funds or other safer assets that provide fixed but moderate returns.
Long gone are the days when people used to work till old age. Today, many people aspire to retire early in their 40s to pursue their passion. However, this is only possible if you plan your retirement well from an early age.
You must ensure that you have sufficient funds to take care of your everyday expenses as well as do things that you want to do. For example, if you want to start a small business after retirement, you can invest in different schemes to get the initial capital for the same.
This will ensure that you have sufficient funds for the business and for your other expenses.
Greater tax benefits
Apart from helping you secure your old age, i.e., life after retirement, investments in retirement plans can help you get valuable tax benefits. If you invest wisely in tax-saving investments, you can save more for your future. Most of the retirement plans qualify for the tax benefits under Section 80C.
Invest in a retirement plan now and secure your future
Now that you are aware of the various benefits of investing in a retirement plan, start investing at a young age and give yourself the best chance to be financially independent in the second innings of your life.