When you’ve recently started earning, planning for your retirement may sound like something that may not be needed yet. However, it is never too early to start planning for a financially independent future for yourself. The moment you receive your first paycheck is the best time to start planning.
Beginning your retirement planning when you’re still in your early 20s allows you to develop good habits and have plenty of time to compound sufficient savings to sustain a comfortable lifestyle during your post-working days.
While you may find it overwhelming to save your first income in an investment plan instead of spending it on items you always wished you could purchase, this will prove to be beneficial at the time when you can no longer exchange your skills for money.
Moreover, like anything else, breaking down your retirement planning into manageable chunks always helps you prevent getting overwhelmed. Aligning your spending habits in your early 20s will surely prepare you for a successful and comfortable retirement.
What’s The Perfect Age to Get a Retirement Plan?
While you may have several competing goals in your 20s and retirement may seem a long way off, it is the only time in your life when you can make the most of the powerful math of compounding growth. This allows you to yield the benefits of a retirement plan to their fullest.
Here’s what you should keep in mind while investing in your early 20s:
1.Take Advantages of Your Employee Benefits
When you work a full-time job, your employer may provide you a range of benefits such as a pension policy or health insurance. It is necessary to know the benefits offered by your employer to make the most out of them.
A certain amount of money is taken out of your paycheck for these benefits, which is usually lesser than what a standalone policy would cost. As long as you’re working, the money is compounded over time and you can withdraw it at the time of your retirement.
2.Keep Records and Plan Budget
To be able to save money efficiently, you just need to spend less money than you make. With that said, habits like living below your means can help you greatly in your adulthood. The goal here is to survive on 85% of your income and keep the 15% saved for retirement through a good retirement plan in India.
Additionally, while the digital transition has virtually eliminated the need for wiring checks or receiving billing statements, you still have to keep a record of your spending habits. Even a simple spreadsheet can allow you to track your income and expenses with ease, which also helps you stay in control.
3.Avoid Debt at All Costs
When talking about avoiding debt, you first need to understand the difference between good debt and bad debt. If you start a business with debt, it involves collateral that can be leveraged in the future. However, consumer-related debts like credit cards are a big no.
As the latter charge higher interest rates, you may eventually stack up a significant amount of debt especially when you’re still young. This will only make things worse when you grow older. As a general rule of thumb to prevent debt, make sure you never buy what you cannot afford.
Best Retirement Plans in India
1.Canara HSBC OBC Pension4Life Plan
If you want a retirement plan that offers guaranteed regular income in your post-work days to manage your day-to-day expenses, this is the best plan that you can get at a very affordable price. Moreover, being an annuity product, it also offers prespecified annuity installments for the purchase price of the policy.
The payouts are transferred directly to your bank account and you’ll receive recurring income through this plan as long as you’re alive. Additionally, you can also choose from both deferred and immediate annuity options depending on your financial requirements. In case you die during the policy tenure, the plan also offers death benefits to your chosen nominee.
2.LIC Jeevan Nidhi Plan
The LIC Jeevan Nidhi Plan is a with-profit pension plan that helps you save a significant amount of money to initiate an income stream that allows you to manage your daily expenses in your retirement days. Once your policy’s tenure is over, you can start availing of the benefits as well as payouts offered by the policy.
Moreover, as per the prevailing laws of the Income Tax Act of India, the premiums paid towards the policy are exempted from taxes. There are also guaranteed additions at just Rs. 50 per thousand sum-assured for the initial five years of your policy. After completing five years, the policy will begin taking part in the profits.
3.HDFC Life Click 2 Retire
The HDFC Life Click 2 Retire is a unit-linked insurance plan that makes retirement planning completely effortless for you. The plan allows you to gain higher returns from market-related investment options as per your financial requirements and also guarantees vestige benefits in addition to assured gains from a range of funds.
Moreover, as the plan has a minimum maturity age of just 45 years, you can easily enjoy the benefits of this plan early as soon as your policy’s tenure is over. In case of your unfortunate demise during the tenure, your chosen nominee will be eligible to receive a death benefit equivalent to 105% of the total premiums you’ve paid until death.
At a certain point in your life, you’ll no longer be able to work and earn a living through a day job. With that said, if you want to make sure that the most relaxing phase of your life is spent comfortably, you must start retirement planning as early as possible.
With a good retirement plan in India, you can accumulate a good amount of savings for your retirement and make sure you never have to face any financial hardship or depend on anyone to help you with your expenses.