When Should You Start Investing In Retirement Plans?

Having invested in a good retirement plan will always ensure that you have enough corpus to help live a lifestyle desired even after you retire. How many of us still believe that planning for your retirement years should begin only once you are close to middle age. Ask a young professional, someone who has just started working about their retirement plans and investment. The answer got is that they are too young to start thinking about their retirement, planning about retirement is perfect to think about only once they start their own family. These are certain important decisions no young professional is ready to even give a thought unless they reach a certain age threshold.

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Although there is no such thing as the right time to invest, the sooner you do the better it is. Not many realise the importance of investing in a good retirement plan early on in life. Individuals need to start looking at a stable future, this is possible only through smart investing at the right time. 

When we talk about smart investing in retirement plans in India or any other investment plans, we are referring about investing early in life. Conscientious individuals will always set aside money to help them face any future adversity. While most of them put off the need to invest for the future after they meet or reach a certain goal or stage in life. 

Although retirement is an aftermath, what people need to realise is that planning in advance will ensure that you are financially comfortable. It’s not just meeting you're monthly expense, but also ensuring that you lead a life that you’ve always wanted to. Not planning for it could cause financial restrictions and eventually a life that is filled with nightmares. 

Without any doubt, the right time to invest in good retirement plan is, Right Now!

 We believe in the fact that time lost is money lost, and time can never be bought back. You can never amend or go back in time to secure yourself financially. Neither can you invest a lot more in retirement plans thinking that you're making amends and will meet your financial goal eventually.

Lets explain this further with a common situation that most of us are aware of. 

Twinkle and Rimi are two professionals working on their first job. At 25 years both are hit with a dilemma of when is the right time to start investing in retirement plans. Twinkle however has already begun investing Rs 1,000 for every month in a retirement plan, for a period of 25 years. Rimi on the other hand wants to invest, but feels at 25 years of age, it is a bit too soon to invest in any retirement plan. Her plan is to invest after she gets married and starts her own family, till then she plans to enjoy her income to the fullest. However Rimi plans to invest Rs.2000 for a 15 year plan.

Will Rimi eventually save as much as Twinkle? The answer to this will bring to light why investing early in life is beneficial. 

Considering that return on investment for both Twinkle and Rimi is at 12%, the maturity amount will show a huge difference. 

On maturity, Twinkle receives Rs. 1,897,635, while Rimi receives Rs. 1,009,152. 

Compound interest plays a huge role in defining how your investment plans are. As shown in the example above, we notice that although Twinkle invested only a small amount for a longer period of time, her earnings on maturity is much higher than Rimi. This is irrespective of the fact that Rimi has saved double the amount. In this catchup game, Twinkle has obviously gained the advantage. Twinkles 10 year investment head start has made all the difference with almost 88% higher earnings than Rimi.

The example clearly indicates that saving at an earlier phase is highly beneficial. More so if you start investing as soon as you being earning and are on the job. A small amount every month makes a huge difference. You don't really have to invest a lump sum amount. Catching up to meet your retirement goals is again of no use. 

The best way to increase your maturity amount is to increase your investment value as per your increment in earning. There are several insurance companies that offer some excellent retirement plans to choose from. Several of these plans can be tailor-made to suit your requirement and reach your financial goals. Investors have different risk profiles as well as investment goals, all of these can be can be met with suitable retirement investment plans. 

It is wise to note that retirement is not just about starting to save early in life, it has a lot to do with the kind of lifestyle you plan on enjoying after you retire. 

Written By: PolicyBazaar - Updated: 20 August 2021
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