When and how to plan for retirement


Financial planning involves a systematic approach to achieving various life goals. Although these goals may vary from one individual to another, retirement is a common goal for all. In India, where around 62.5% of the working population is between the ages of 15 and 59, planning for retirement is even more crucial.

However, retirement planning is one part of financial planning that is often overlooked or postponed. This delay could be a costly mistake, as starting retirement planning late can result in a loss in market-related investment returns and tax benefits during your working years.

By planning your retirement carefully, you can provide yourself with a comfortable life after your working years. So the question arises, when and where to start? Let’s find out.

When to start planning for retirement?

The short answer is – as soon as you get your first paycheck. Your 20s or 30s are the best years to start planning for your retirement because you are tapping into the power of funding. Compounding is essentially the phenomenon where you earn interest on interest, allowing your money to grow exponentially rather than linearly. And the longer you stay invested, the more the power of compounding helps your funds grow.

Younger, you have fewer financial responsibilities, which allows you to save and invest more. With time, you can afford to invest in potentially rewarding instruments like stocks. Although the stock market can be volatile in the short term, data shows that you can offset this long-term volatility to achieve stable, inflation-beating returns.

Starting a SIP in your 20s or 30s can be very profitable in the long run. Here’s how: A monthly SIP of Rs 5,000 at 10% per annum, ages 30 to 60, creates a corpus of Rs 1.13 crore. But even a higher monthly SIP of Rs 10,000 at 10% per annum, from 40 to 60, creates a corpus of only Rs 76 lakh.

Postponing your investments for just a few years can affect your retirement capital. So get a head start on your retirement plan in your 20s or 30s to make the most of your earning years.

While starting the retirement process earlier has its benefits, there’s no need to panic if you’re late. If you are approaching retirement age, all you need to do is change your retirement planning. The most critical aspect of late retirement planning is risk reduction. Your objective should shift from aggressive capital appreciation to calculated capital preservation.

Gradually reduce your exposure to volatile assets like stocks and increase your exposure to fixed income securities. This way, you can have a stable source of income to replace your main income once you stop actively working. You can consider options such as debt funds, fixed deposits, gold, and other safe investment ways to achieve your goal.

Where to invest

The Indian financial market offers a wide range of investment options to help you build your retirement fund. Some of them are as below:

Equity funds

Equity funds are mutual funds that invest in direct equity assets. Mutual funds give you a head start if you start investing in them when you’re younger, as they have the potential to generate better returns. And equity mutual funds generate the highest returns with the added benefits of professional management and ease of use.

Debt funds

Loan funds can help middle-aged investors build their retirement capital without taking on high risks. These mutual funds invest in debt market instruments such as government bonds, corporate bonds, and other debt securities.

National Pension System (NPS)

The NPS is a government-backed initiative that helps you voluntarily save for your retirement during your working years. You can withdraw part of your corpus in retirement and use the remaining funds to receive a stable pension.

Public Provident Fund (PPF)

PPF is another long-term investment option with a duration of 15 years. You can invest any amount from Rs 500 to Rs 1.5 lakh every year, and you earn interest on these investments at 7.1% per annum. You receive your principal and accrued interest when you retire.


The bottom line is that planning for retirement is not an exercise to be put off. By planning your retirement carefully, you can lead a comfortable, financially independent life during your golden years.

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