Home Finance How To Start Saving For An Early Retirement?

Saving for retirement from a young age, when you are in your 20s or 30s, may seem too far fetched a goal. However, this is the best time to put your hard-earned money to use for a secured future. If you are starting investments at a young age, you will rightly choose a high percentage of more pro-risk investment options such as mutual funds and equities. However, at the cusp of retirement, you should consider safer options like fixed deposits for senior citizens. For example, NBFCs offers Senior Citizen FDs that have high-security ratings along with a high FD interest rate of up to 8.75%. This makes it a more secure option for retirement.

While choosing investment options for retirement is one thing, here’s why you need to start saving early for retirement.

  • To counter the effects of inflation
    In today’s inflation-fuelled world, you will need to start planning early for retirement. Experts estimate that to maintain a comfortable lifestyle you will need at least Rs.5 crore at the time of your retirement. As a retiree, you will need to consider investment options that will help you grow your savings into a wealth corpus.
  • To cater to your material needs
    As a young working millennial, you may feel the need to update your gadgets to keep pace with the world personally and professionally. These short-term investments do not come easy on the pocket and tend to have a low resale value. Similarly, you may want the best in home electronics and durables. So, to stay abreast of technology, gadgets, home automation and more today and after you retire, you’ll need to start saving and investing today.
  • Financially responsibility
    Personal independence is vital as it promotes both happiness and satisfaction. In your sunset years, you will want to enjoy the same independence you enjoy now living on your terms, working, setting out on international holidays, and enjoying leisure with your friends. Saving smart from now will help you enjoy your independence even after retirement.

How to Plan your Retirement?

Planning for your retirement requires strategic investments that help you grow your wealth along with clear roadmaps.

Here’s how you can start planning for retirement.

  • Set a goal: As with any long-term plan, you need to start by setting a financial goal. In this case, you should have a monetary amount you want to save for retirement. As mentioned earlier, a target of Rs.5 crore will ensure you have a comfortable retirement.
  • Plan on meeting the goal: Now, put aside money every month to meet your financial goal. Think about the future every time you are tempted to buy the latest gadget and differentiate between ‘needs’ and ‘wants’ for clarity on whether your next purchase is necessary.
  • Phases of savings: To help you achieve your retirement goals, you can divide your investments based on your spare income. So, for example, if you are in your twenties, you may have lower financial obligations as you may not be married and may not have a home loan.

Use this time to save a larger percentage of your earnings in high-risk investments so that you gain higher returns from the market over time. Similarly, if you are in your thirties, you are likely to have fixed monthly expenditure owing to loans, rent, and may also have to pay for your child’s education.

At this juncture, your contributions towards savings and investments can reduce. Additionally, this is the time when you should devote a portion of your excess funds in assured return low-risk instruments along with moderate risk instruments. This will ensure you build a bigger corpus of wealth for your retirement.

  • Investment options: Start by making high-risk investments in equities at a younger age and then balance them with mutual funds and fixed deposits to ensure a balanced portfolio. With time, as your income increases and you approach your retirement, you can choose to reduce the risk in your portfolio and add other asset classes which you may need later on in life.

To be able to enjoy your future independently and live comfortably, you will need to save for your golden years early. The larger head-start you get in the savings game, the less you will need to push yourself when your expenses increase over time. Closer to retirement, you should ideally invest a large portion of your corpus in fixed deposits. However, make sure to check the FD interest rates and use the FD calculator to know your realisation.