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It is never too early to start retirement planning
For most individuals, the idea of retired life is a blend of a relaxed lifestyle, new hobbies and independent living without worrying about expenses. However, with the inflation rising to a record high, simply thinking about the retirement amount you would need after several years is not enough. For you to have a sufficient corpus for the sunset years, systematic planning early in life is a prerequisite .
The following pointers might help you get started in the right direction:
The power of compounding
One of the biggest advantages of saving early is compound interest. When a compound rate is applicable, you earn interest on the principal as well as the accumulated interest amount. If you start in your late 20s or early 30s and invest regularly, your capital investment will help you earn more returns. The task of building a large nest egg for your retired life hence becomes just a bit easier.
Know your requirements
Post retirement, your regular cash inflow in the form of your salary will stop. If you haven’t chalked out a plan for other sources of income, taking care of monthly expenses during the retirement years might become a challenge. Whether you plan to live a lavish lifestyle or a simple one, start with a clear picture in mind. Assess your needs, taking factors like inflation and exigencies in mind. This will help you derive the exact retirement corpus you will require.
Save and invest regularly
Starting early is a brilliant idea. However, in order to give shape to your dreams, it is important to stick to your plan. The best way to accumulate a nest egg is saving money regularly and investing in instruments that help it grow. Start by investing a small amount every month, and increase it gradually.
Actively manage your investment portfolio
An ideal retirement portfolio should be a diversified one, with investments in fixed deposits, mutual funds, equities, real estate, insurance, etc. However, in order to maximise your returns, you need to manage your portfolio actively. For instance, you can take more risks and consequently earn more while you are young and have comparatively lesser financial responsibilities. However, as you move towards retirement, it is advisable to transfer your funds to safer instruments.