WHAT IS THE RIGHT TIME TO START RETIREMENT PLANNING?
Confused what is the right age or right time to start financial planning for retirement?
The answer is, right now!
Yes, you’ve read it right. The right time to start with retirement planning investments is often believed right from your first job. As the sooner you start, the better returns you get. Starting with retirement planning at an early age has far more merits.
Here’s how you should go about retirement planning at different stages of life –
When you start investing early in life for your golden years, you are able to accumulate the desired corpus for every important junction of your life through the power of compounding. Also, you are able to balance the risk and return of your investment portfolio.
In so doing you first need to determine the corpus you would require post-retirement and then start with investing with the discipline to accumulate the desired corpus. It is also crucial that you develop a thoughtful plan to allocate and invest your money.
Being a young investor, you can invest a large percentage in risky asset classes, such as equities. For a simple reason being; you have enough time and opportunities to balance your portfolio and get maximum returns.
In the middle age, you mostly climb the corporate ladder. Simultaneously, your responsibilities to increases like the home/car loan, family’s cost of living, child’s education and their future, their marriage, taking care of your parents in their old age and so on.
In this phase, it is essential for you to have a clear vision of your financial goals and important milestones of your life. It is hence very crucial for you to investment thoughtfully for each and every important aspect of life, as well as investment for emergency and health expenses.
You can also consider investing in tax exemption investment instruments, which will attract lower taxes when redeemed, post-retirement.
In the 50s, you must have reached the crescendo of your earning potential. By this time, most of your major outlays in life such as buying a home, repayment of home loan, child’s education are already behind you. Hence, you have the opportunity to increase the contribution towards your retirement goal. It is the best stage; make the most of this opportunity to give the last booster to enhance your retirement corpus.
However, when you near your retirement, you need to be overly cautious about your asset allocation. You can keep a small portion of your portfolio in risky asset classes, the remaining must be shifted to relatively less volatile asset classes such as debt and gold.