Retirement planning may seem a luxury for many from the low-income groups, especially when their present itself might feel so financially stretched. But here’s the truth: you don’t need a high income to build a stable financial future. What you need is a strategy, consistency, and a few smart money habits.
Here’s a guide on how people from low-income brackets can still save for their retirement—one step at a time.
Start Small, But Start Early
Savings and investing large proportions is not the only way to go. Even if you can only set aside Rs 100–500 a month, then start with it today itself, don’t delay.
Time is your greatest ally because of the benefit of compounding; the longer your money stays invested, the more it grows. It is important for an investor to exercise discipline and consistency rather than just put money for investment. Many people buy and sell too frequently and end up losing more money than they actually earn.
For instance, saving just Rs 500 per month from the age of 25 years at an average 8 per cent annual return can grow to over Rs 15 lakh by age of 60. You can also increase this amount as your income increases and make larger investments.
So, having a steady savings option and investment plan might be a slow way to the top, but discipline and consistency works well. One may also consider systematic investment plan (SIP) in equity mutual funds early in one’s career to build a decent corpus for retirement.
Use Government-Backed Pension Schemes
India has several low-risk, low-investment options tailored for low-income individuals. Some of these are mentioned below.
Atal Pension Yojana (APY): Indian citizens aged 18-40 can open an APY account, with government contributions for those joining between FY2015-16 and FY2019-20. APY pensions come in five slabs, with monthly, quarterly, or half-yearly contributions. APY offers assured pension of Rs 1,000–5,000 per month after 60 years of age.
Pradhan Mantri Shram Yogi Maan-Dhan (PM-SYM): The Pradhan Mantri Shram Yogi Maandhan Yojana (PM-SYM) is a central government pension scheme designed to provide social security in old age to workers in the unorganised sector. The scheme is open to workers aged 18-40, with monthly income of Rs 15,000 or less. The pension benefit is a monthly pension of Rs 3,000, guaranteed for life.
Participants contribute a small amount, matched equally by the government, depending on their age.
Understand Your Spending Habits
It’s easier to save when you know where your money is going. Keep a simple monthly expense tracker either on paper or digitally. A self-assessment of your spending pattern can help you get an idea of where you are over spending. You can relocate that overspending towards savings through various other alternatives, such as cost cuttings and budgeting.
Use the “Envelope” or “Jar” System
It is crucial to budget your expenses and divide your income into various categories of expenses, such as needs, savings or investments, emergency fund, and lastly, your wants and desires.
You should dedicate maximum amount to your needs such as 50- 60 per cent, save 20 per cent of your income and 10 for an emergency fund and the rest 10 per cent for your wants, such as designer clothes. By putting this money into different jars you will be able to prioritise your expenses and prevent overspending. This method creates discipline without having the need to use any complex budgetary apps.
Build an Emergency Fund First
To avoid dipping into your retirement savings during crises, set aside 3-6 months of basic expenses before investing. Use a savings account, recurring deposits for discipline, or Post Office Savings for small amounts.
Take Advantage of Tax Benefits
Under Section 80C of the Income-tax Act, 1961, contributions to schemes like the Employees’ Provident Fund (EPF), Public Provident Fund (PPF), National Savings Certificate (NSC), and Atal Pension Yojana (APY) are eligible for tax deductions. Even if you don’t file taxes now, it’s helpful in the future when income grows.
Retirement Planning is Not Just About Money
To plan for your retirement, consider staying healthy, learning new skills, and owning a small home or plot for security. Instead of relying on large bank deposits, focus on a steady habit of saving, using appropriate tools like pension plans or SIPs in mutual funds, and maintaining patience and consistency. Retirement is not about earning, but about regularly saving.
