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Retirement Planning: 30 years is not just the age to earn, it is the age to quietly launch the rocket of retirement, which will fly farther the sooner it flies.
Retirement Planning: The age of 30 is considered the best time to start retirement planning. At this age you have less responsibilities and your income starts increasing. The biggest thing is that you have the next 25-30 years in which compounding can make even your small savings into a big fund. Therefore, being young does not mean that one should worry about retirement later. Most people make this mistake and lose years of compounding benefits.
First of all understand how much retirement corpus you need. Suppose your monthly expenses today are Rs 50,000. Assuming 6 percent inflation, by the age of 60 this expenditure will increase to approximately Rs 2.87 lakh per month. After retirement, it is important to make a plan for at least 20-25 years. Experts say not to underestimate the power of compounding. If a person at the age of 30 invests Rs 20,000 every month, then at 8 percent return it can reach Rs 3 crore, at 10 percent it can reach Rs 4.56 crore and at 15 percent it can reach Rs 14 crore.
Asset mix required
The right asset mix is important when investing for retirement – 60-70 percent equity, 20-25 percent debt and 10-15 percent EPF/NPS. Even a small gold exposure (5-10 percent) makes the portfolio safe. Apart from this, keep health and term insurance separately so that your retirement fund does not get depleted in an emergency.
Pay off expensive debt first
If you have expensive debts like credit card or personal loan, it is better to repay them first. But with a cheap loan like home loan, you can also continue investing. The biggest mistake is using retirement savings for other needs. This breaks compounding. Therefore, create a ‘separate retirement SIP’, which should never be touched in between and keep increasing it every year as the salary increases.
