Retirement Planning: 7 Things To Get Right At Every Age

Retirement can seem far away when you are young, but the earlier you start preparing for it, the less stressful it becomes later. Even if you have delayed planning, it is never too late to begin.

When you are in your 20s, retirement probably feels like someone else's problem. In your 30s, there is a home loan, children and a long list of expenses to deal with. By your 40s, retirement starts appearing on the horizon. And in your 50s, the question becomes more urgent: Have I saved enough?

There’s no perfect age to start planning. Start with what you have and revisit your plan as life evolves.

Here are seven things to remember.

1. Start As Early As Possible

The biggest advantage that young investors have is time, not money.

Even small amounts invested periodically can build a substantial retirement corpus over several decades, thanks to compounding. EPF, PPF and NPS can provide a base to your retirement planning while investing in mutual funds can give your portfolio a growth push.

If you’re young, don’t wait to start saving until you can put away a big amount. Start with what you can and increase your contribution every time your salary increases.

2. Don’t Rely On A Single Investment For Returns

Retirement portfolios have to last for several decades, so it’s unwise to put all your money in a single asset class.

Diversifying into stocks, bonds, real estate and other sensible investments can spread your risk. You can adjust your asset allocation as you age, too. A 20-year-old investor can afford to target more growth, for instance. But someone near retirement may need to be more conservative.

The goal is not to find the investment that gives the highest return. It is to build a portfolio that can survive market ups and downs.

3. Save Tax, But Don't Invest For Tax Benefits Alone

Tax-savings investments can double up as retirement planning investments, but don’t choose an investment just because it gives you tax benefits.

PPF, NPS, ELSS and eligible tax-saving fixed deposits may have a role depending on your circumstances and the prevailing tax rules.

The better question is: Does this investment help me reach my retirement goal? The tax benefit should come second.

4. Don't Leave Employer Benefits Unused

Your EPF, employer NPS contribution, gratuity and other retirement benefits are part of your overall compensation.

Know what your employer provides you and utilise it. You can choose to do voluntary retirement planning if you can afford it and wish to increase your corpus even further.

Though it doesn't feel like much every month, when done over the course of your 20- or 30-year career, it becomes a sizeable amount.

5. Check Your Plan Regularly

A retirement plan made at 30 may not work at 45.

Your income may have increased, your children may be in college, your home loan may be nearly over or your expenses may have changed. Each of these can affect how much you need to save.

Give your retirement plan a health check at least once a year. If your income rises, try increasing your retirement contribution rather than allowing your lifestyle expenses to absorb the entire increase.

6. Remember That Today's Rs 50,000 won't be tomorrow's Rs 50,000

Here lies the silent menace of inflation.

What can buy you a comfortable monthly living today, will fall short 15, 20 years down the line. Food, rent, travel expenses and medical costs will be much higher.

Therefore, don't calculate your retirement requirement using today's expenses alone. Build inflation into your calculations and ensure that your investments have the potential to grow faster than inflation over the long term.

7. Keep Healthcare Outside The Retirement Blind Spot

Many people plan carefully for their regular retirement expenses but forget about medical costs.

A single major hospitalisation can put a serious dent in years of savings. Adequate health insurance, along with a separate emergency reserve, can therefore be an important part of retirement planning.

Review your health cover as you get older. Don't assume that an insurance policy bought years ago will automatically be enough for your needs later.

Retirement Planning Is Really About Buying Yourself Choices

Retirement planning isn't about building the biggest possible corpus or following a complicated investment strategy.

It is about reaching a stage where you don't have to worry about every monthly expense after your salary stops.

For someone in their 20s, the priority should be starting early. In the 30s, it is about building the habit and increasing investments. In the 40s, the focus should shift towards catching up, reviewing the corpus and managing risk. And as retirement approaches, protecting the accumulated wealth and creating a dependable income become increasingly important.

The best time to start may have been ten years ago. The next best time is today.