When we are in our early 20s, we tend not to think or even plan for our retirement. However, like the old age goes – “The early bird catches the worm”; which means, the earlier you start planning and saving for your retirement, the better it is for you. It is essential to think about your retirement and purchase pension plans while you are still in your late 20s – early 30s, and at the prime of your professional life to get your retirement goals done.
Here are some of the important benefits of early retirement planning:
- Tax Benefits: Investing in a pension plan early on is not just beneficial for the obvious reasons, but it will also give you tax advantages. One important benefit that you receive is that retirement plans reduce the amount of income tax that you need to otherwise pay to the government. You can also choose for diversification, in the form of tax-deferred, tax-free and taxable money accounts and withdraw your corpus from all three accounts depending on your needs and requirements. Alternatively, you can invest in a unit-linked pension plan which provides market-linked returns. These options will also help you to achieve early retirement, if that’s what you are aiming for.
- Medical Emergencies: Life is unpredictable and one never knows when medical emergencies might strike. Medical healthcare is expensive, and aging naturally brings with it diseases and health issues. Therefore, it is important to start saving and to start building your retirement corpus while you are still in your 20s and 30s, and overall healthy. This will also ensure that you do not have to depend on anybody during times of crisis.
- Power of Compounding: It might seem like common sense, but this point is still easy to miss out. When you start planning your retirement and invest in pension plans during your youth, you naturally give more time to your investment to compound and grow. You can build a larger corpus if you regularly put aside a small sum of money as compared to someone who starts later and invests more money.
- Rainy Day Funds: Let’s face it, you need coverage for the rainy days. Life can throw in a curveball whenever it pleases, and you need to be prepared for any kind of eventuality such as the death of the breadwinner, unplanned financial contingencies etc. Having a safe and secure savings corpus for your retirement will help you to sail through any situation with dignity and strength. Consider this as your “emergency stash” and begin investing early on!
- Dependent Family/Spouse: It is also essential to secure your family’s future along with your own, especially if they are dependent on you. Start saving as much money as possible, early on in your career, so that your retirement does not adversely affect your spouse or your family members. This will prepare you and your family members in advance for any eventuality and any major life changes. You can choose a life insurance based pension or a sturdy early retirement plan; this is something your loved ones will definitely thank you for. After all, they deserve to live life comfortably and stress-free, even after your retirement.
Retirement planning is not something people have on their priority list in their early 20s. However, the longer you wait towards generating your retirement corpus, the more difficult it becomes for you to fulfil your retirement life goals. Hence, begin early retirement planning to lead a stress-free life.
