“Someone is sitting in the shade today because someone planted a tree long ago”.
-Warren Buffet
Have you ever enjoyed the satisfaction of taking in the scenery from a stunning mountain peak after spending hours climbing it? The view is breathtaking, and words cannot adequately express the joy.
Life resembles that mountain in many ways. It takes years to climb up, and the journey is full of joy, obstacles, and surprises - all at once. Your motivation comes from the anticipation of seeing something fantastic. However, what would happen if the view was not worth your effort?
You would be overwhelmed with disappointment.
Life is similar in this regard. Retirement is akin to reaching the mountain top. After the constant hustle and daily grind, your life must also give you joy like you get while experiencing the breathtaking view from the mountaintop.
How do people in India view retirement? Do Indians find retirement planning valuable?
ICICI Prudential Life Insurance, a notable life insurance company, conducted a survey titled - “Is India prepared for retirement?”
Here are the key takeaways to better understand the Indian perspective on retirement planning.
“Indians view retirement in two ways-
a time when they wish to continue living a comfortable lifestyle.
a time when they wish to upgrade their lifestyle and grow”.
2. “They view retirement as a phase to grow oneself and have fun”.
3. “Indians have a realistic approach towards retirement. While they view retirement positively, they do get anxious about it. Their worries include health issues due to terminal illness, inflation impacting their savings and the financial well-being of their spouse”.
“The respondents put aside an average of 17% of their income towards retirement. They rely mainly on investments in the National Pension Scheme, fixed deposits and plans that give them regular income to be retirement-ready”.
“People who felt prepared started investing for retirement when they were about to turn 40".
Retirement may seem like a distant concern, but old age is inevitable. Many people believe that merely saving a part of your income would act as an emergency fund for the future. However, rising inflation and rapidly changing economic landscape of India directs towards the need to invest these savings and gain additional returns to build a significant corpus. Therefore, we recommend that you plan for your retirement early by investing your savings. But before you get started, you must know what it takes to be a good investor.
Well, there are some practices you need to follow.
Diversify your portfolio and spread your investments across different types of assets to reduce the risk associated with underperformance of a particular class of assets.
Stay updated on market trends to make informed decisions and time the market accurately.
Define clear objectives and goals for your investments to stay focused in the long run.
Regularly review and adjust your investments to align with your goals.
Keep a long-term mindset. You can always take calculated risks without fearing short-term market fluctuations when you start early.
While you follow the above-mentioned practices, there are a few practices you must avoid, especially if you are a beginner.
Avoid making impulsive decisions driven by emotions or influence, as they can lead to poor choices.
Never make an investment without complete information about the asset or implement strategies that you don't fully understand.
Avoid relying too heavily on a single investment, as it increases the risk of significant losses. Don’t put all your eggs in one basket. Build a diversified portfolio.
Prevent yourself from falling for scams. Be cautious of “25 din mai paisa double” schemes that promise quick and unrealistic returns.
Now that you are informed about the ‘Do’s & Don’ts”,let’s get back to why you should start investing your savings in retirement planning early. Here are the five primary reasons!
Mighty Mathematics
Have you heard of ‘compound interest’ in your math lessons during school? This term is also known as ‘compounding’ in finance. When you plan for retirement early, you give your investments enough time to develop exponentially into a sizeable corpus. That is the fundamental concept of compounding. In other words, you will have a larger corpus since your assets will have more time to grow if you plan early for your retirement.
Suppose you are 25 years old and start investing ₹13,000 per month for 40 years at a return of 12% per annum. When you turn 65, your corpus will approximately be ₹64 crores. Now, your friend who is 30 years old also starts investing ₹13,000 per month.
But as he didn’t start investing early, the corpus left with him when he turns 65 will approximately be ₹35 crores.
Compounding has this kind of power.
2. Scale down the stress
The state of being prepared for circumstances that are likely to arise in your future will help you stay calm and relaxed. Early preparation helps in providing you with a sense of assurance. As you grow up, you shoulder several responsibilities that might distress you and hamper your peace. Dealing with apprehensive concerns related to your well-being and wealth in the future might as well harm your mental health. Early planning can help fix these concerns and provide great peace of mind.
3. Bigger risks, better rewards
Generally, the younger you are, the lower your risk aversion is. As you grow up, you get more reluctant to invest in risky financial instruments due to fear of low returns and market volatility. However, if you start your investments early to plan for your retirement, you will have more time to recover from any losses you incur from those investments.
4. Accomplish your aspirations
Why is retirement considered a line drawn to segment our lives into two phases? A common fallacy is that the phase of your life after you retire is when you should cease to work. Age, however, is just a number, as they say. Not only will a sizeable sum of money enable you to live comfortably, but it will also serve as your backbone for accomplishing long-held goals and increasing productivity.
With sufficient funds, you can reignite your spark and achieve your goals and aspirations even after you retire.
5. Be your own master
Living your life according to your own rules always sets you apart. When you start investing for your retirement early, an opportunity to ‘retire early’ will also present itself.
Planning for retirement early in your life helps you set your financial goals and objectives, so you get ample time to work towards achieving them. With the availability of a substantial corpus, you need not necessarily worry about the consequences of early retirement and can lead your life with ease and comfort.
To sum it all up, planning your retirement in the early years of your life is paramount to building a financially secure future for yourself and your family. According to the survey conducted by ICICI Life Insurance Company, which we mentioned early in this blog, people find themselves concerned about,
Not having enough money for retirement.
Not knowing the right way to invest money.
Making hasty and uninformed decisions by reacting to market trends.
Do you share similar concerns? Worry not! Our Ambrela experts aim to assist you in managing your wealth and deliver solutions related to planning your retirement. We help you pick the best investment plan customized according to your financial goals, so you can gift yourself a financially secure future.
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