What would happen to your life if you became 60 years old without any monthly income but with the same monthly outgoings that you have at the moment? Your rent/maintenance cost, food cost, medical expenses, electricity and other expenditure doesn’t change even when you retire. The question you should ask yourself is whether you could live the rest of your life on your present savings for 20-30 more years.

No one wants to think about it since it is an unpleasant subject to discuss, but you shouldn’t ignore it either. The farther away the retirement is, the less stressful the situation becomes, but remember that every passing year means that your money lose their chance to earn more money.

Why Retirement Planning Should Be Done Sooner?

Most people feel that retirement planning should be done around their 40s and 50s. Actually, it’s better if you plan your retirement when you are still young, in your 20s or 30s. Because, the power of time works wonders in investing. As you will get more years to let your money work hard through compounding where even your gains start making profits.

Though you will be able to invest smaller amounts at first, but consistency over a period of several decades will really make a great deal of difference. Delaying the process means you will have to invest far higher amount of money in order to achieve your objectives.

A Practical Example

Imagine Ram and Anita both want to retire comfortably at the age of 60. am starts investing ₹5,000 every month at the age of 25, while Anita waits until she turns 35 to invest the same amount. Although both invest consistently, Ram’s money gets an additional 10 years to benefit from compounding. As a result, he has a better chance of building a larger retirement corpus without increasing his monthly investment. This example shows that when it comes to retirement planning, time can be just as valuable as the amount you invest.

Retirement Is Costlier Than Ever Before

Retirement today is not the same as it was a few decades ago. People today have a tendency to live longer and healthcare costs are also constantly increasing, while inflation continues to raise the cost of living. While ₹40,000 per month may seem a lot to spend today, it’s likely to cost much more in two decades. That’s why your retirement saving plans must include future expenses also.

Do You Rely Only on EPF for Your Retirement Needs?

It goes without saying that EPF is the first step towards retirement for many salaried individuals. Although the EPF scheme serves as an excellent base to begin your retirement planning journey from, there may be situations where it might not suffice alone. Your retirement needs are dependent on various aspects like:

• Your desired lifestyle
• Healthcare expenses
• Family responsibilities
• Inflation
• Life expectancy

A lot of people opt to invest in EPF in addition to SIPs, mutual funds, NPS or any other savings meant for their old age. Diversification will give you more security.

Warning Signs That You’re Not Saving Sufficiently

Even though retirement may be decades away, there are certain financial practices that can help you identify if you are going the right way with your retirement plan. You may require reviewing your retirement plans if:

• You haven’t started with investing yet.
• You escalate your expenditure with every salary increment but not your investments.
• You continuously withdraw from your long-term savings.
• You have no clue how much you will require post-retirement.
• You lack a clear retirement goal.

Identifying such warning signs will give you ample time to make changes to your plans.

Signs You’re on Track vs Signs You Need to Improve

Small Increases Can Create Huge Differences

The biggest misconception regarding retirement planning is that one needs to make big investments. In actuality, the situation is quite different and gradual increases in your investments can produce a huge difference over time. For instance, by increasing your SIP every time you get a raise in salary, you can save on your retirement without having to dramatically change your monthly budget. Consistent small improvements work much better than large late investments.

Don’t Allow Your Lifestyle To Inflate Your Expenses

With the growth of your salary comes the growth of your expenses. A new car, new house, expensive subscription services, dining out more often and buying new gadgets become the norm. Even though it is fun to live at a higher level, it is wise not to let each of your raises contribute to your lifestyle inflation. You should first make an investment before you enjoy your raise.

Retirement Planning Is Not Only about Wealth

When most people talk about retirement planning, they see it as an effort to earn money for themselves. In actuality, it is about earning financial independence. A sound retirement corpus will be able to enable you to:

• Have your usual lifestyle
• Cover medical expenditures
• Take trips and have fun
• Help your family if necessary
• Eliminate your reliance on your children financially

In any case, retirement planning is essentially about maintaining your independence.

Steps to Improve Your Retirement Plan

No complex strategy is required to begin retirement planning. It can be greatly improved through just a few basic practices:

• Start investing as early as possible.
• Increase your investments when your income grows.
• Avoid withdrawing retirement savings unnecessarily.
• Review your retirement plan every year.
• Balance retirement investments with emergency savings and insurance.

Consistency is far more important than searching for the ideal investment.

The Future is Based on Today’s Decisions

It seems like there is still some time left until your retirement age but it will come sooner than you expect. The real problem is not if you will retire someday but if your savings will be enough to live comfortably at this point of time. Each month when you put off saving becomes one more month which you could have to save. There is no need to start with a huge amount of money because you should only start saving something.

Connect with Aetram if you want to understand retirement planning better and make smarter investment decisions.

Frequently Asked Questions

1. How much should I save for retirement?
The amount depends on your lifestyle, expected expenses, retirement age and financial goals. Starting early allows you to build your corpus more gradually.

2. Is EPF enough for retirement?
EPF provides a strong foundation, but many people supplement it with other long-term investments to meet future financial needs.

3. When should I start saving for retirement?
The earlier, the better. Starting in your 20s or 30s gives your investments more time to benefit from compounding.

4. Should I increase my retirement investments every year?
If your income grows, increasing your retirement investments can help you build wealth faster and stay ahead of inflation.

5. Why is inflation important in retirement planning?
Inflation increases the cost of living over time, meaning you’ll likely need a larger retirement corpus to maintain the same lifestyle in the future.