5 Reasons why you should not delay Retirement Planning

Socialising with friends, going on a cruise with your spouse, pursuing your long-lost hobbies, and enjoying the small things of life are a few things that may have crossed your mind. Beyond this, have you thought of the logistics? How would you fund your retirement when you no longer have a regular income? If you haven’t thought of this, it is time to do it.

While everyone plans things they would like to do in their retirement, most start retirement planning at a different time, not realising that delaying it is the last thing they should do. Some people feel retirement is too far away, while some don’t know how much money they will need during their retirement.

But not thinking about the future can make things very difficult. Without a regular income, you might struggle to make ends meet. After living most of your life with dignity and pride, would you want to depend on others financially?

You may have postponed the idea of retirement planning for several reasons. But here are some of the reasons that explain why you mustn’t delay planning for your retirement anymore:

1. You need to have a source of income as you may not always be able to work:
While the increase in the mortality rate is a positive change, longer lives also mean long years to plan and fund. If you work in the private sector, you usually do not get any pension provisions. Amongst all the uncertainties, it is only sometimes possible that you will be able to work for the rest of your life, making life unpredictable. That is why it is crucial to be prepared in such scenarios by securing a substantial corpus. Early retirement planning and investment is a better source of income that allows financial stability and peace of mind and lets you live longer and healthier.

2. The power of compounding works best in the long run:
To avail yourself of the maximum return benefits of the investments you make, whether, in a mutual fund, bank FD, stock market, etc., you need to stay invested for a long period. When you start investing in your early 20s or 30s, you have enough time to invest, and with the power of compounding, you will end up with a higher retirement corpus than otherwise. The later you start, the lower would be the total returns on investment.

Early investment planning offers enough years to plan, but sometimes people delay it, saying they do not have enough funds to invest. Experts say you should start with whatever you have rather than delaying it.

Let us take this example: Ravi and Abhay, both 25 years old, got a job together. Ravi began with an investment of INR 1,000 every month from when he started working till he turned 45. After 45, he stopped investing further; however, he did not withdraw any money and decided to stay invested until he was 60.

While Abhay started investing the same amount of INR 1,000 per month when he turned 35 years old, he continued to do so until he was 60. If you see, Ravi invested INR 2,40,000 and Abhay invested INR 3,00,000, if the return on investment they are supposed to get is 10% annually, at the time of retirement, Ravi’s investment portfolio will be stronger with a worth over INR 31,00,000, whilst Abhay’s net worth for the investment will be only around INR 13,00,000.

Long story short, even if Abhay invested more money for a longer tenure than Ravi, compounding and early investment helped Ravi favourably. That’s why you must start investing early.

3. You won’t be able to make the most of tax benefits³:
Most of the investment plans in India offer tax advantages³. If you invest in tax-saving mutual funds, public provident funds, NPS, ULIPs, etc., you can save a lot of money under Sections 80C and 80D of the Income Tax Act. If you delay retirement planning, you won’t be able to take advantage of the considerable amounts saved on taxes along with better returns on your investments.

4. You may never be able to opt for early retirement:
Today, people do not work only for money, however. They also work to follow their dreams and passion. Therefore, they choose to work for a certain period to collect enough cash and go for an early/ voluntary retirement. However, if you did not start with early retirement planning, you might not be able to arrange enough money to meet the financial obligations post-retirement or opt for early retirement to follow your dreams. Not being able to retire because of financial constraints can be a struggle at later stages of life.

5. Delay in planning gives you very little cushion time- no savings for unforeseen expenses:
The later you begin with retirement planning, the lesser you are prepared to meet the unforeseen expenses in the future. This is because delay in retirement planning leads to lower savings, more debts, no financial securities, and so on. Also, when you are very near to your retirement, you may not be in a position to dictate the investments. You may also not have the flexibility or freedom to do financial experiments. Hence, to remain independent for the rest of your life, even after retirement, rather than depending on your children or other relatives, you must begin with early retirement planning.

Delay in retirement planning is surely not a good idea. Rather, try doing so as early in life as possible. Here are some smart tips that can help you do so.

1. Get ready to face the transition:
Many people find it difficult to accept ageing and to invest in an unknown future. It is essential to understand the seriousness of financial stability after retirement and invest efficiently in retirement plans from an early age.

2. Chalk out your tentative goals, and list your liabilities:
If you think retirement will be less expensive, then you are wrong. Maintaining a particular standard of living is difficult if you are not working anymore. Hence, think about your retirement in advance, and imagine the life you want. Chalk out the goals that you want to fulfil before retirement. List all the debts and liabilities that you have or that may occur in the future and plan accordingly.

3. Create an emergency fund:
Building a corpus is essential. It lets you create funds for an emergency that helps you meet financial obligations during unforeseen situations post-retirement. To do so, you can set small goals rather than one huge one.

4. As you near your retirement, simplify your life - consolidate your investments:
As you you get closer to your retirement, try to streamline your life by consolidating your investments to make them effortless to manage. You do not really need to manage too many assets. Rather, a bank account for transactions, a single Demat account, and a few mutual fund portfolios are enough. The idea is to keep things simple and easily manageable. Also, see that your everyday healthcare and unforeseen expenses are covered.

Retirement planning is not as difficult as you may think. Research can help you begin the journey. If, however, you feel you need more help, you can always get in touch with a professional and seek the required guidance. With a suitable plan in place, you’ll be financially secure and lead a comfortable life.

https://www.adityabirlacapital.com/abc-of-money/why-you-should-not-delay-retirement-planning⁴
https://economictimes.indiatimes.com/wealth/plan/how-to-plan-your-retirement-5-mistakes-to-avoid-if-you-want-an-easy-retired-life/articleshow/92288607.cms⁵
https://www.cnbc.com/guide/retirement-planning/#how-to-start-saving-for-retirement⁶