Summary of this article
Early equity investing beats inflation through compounding, volatility absorption, growth.
Increase SIPs annually to match income growth and multiply corpus.
Starting early helps, but disciplined investing works at any age.
By KS Rao
Ask anyone about retirement planning and they will tell you: “Start early.” Everyone knows it, but very few actually do it.
The truth is that in retirement planning, time is your greatest asset. It's more powerful than market returns, savings ability, and financial products.
When you start early, time does something extraordinary: It turns small, consistent actions into a life-changing corpus.
Why Early Matters: The Mathematics of Time
Most people underestimate the force of compounding. Compounding is not just growth — it is growth on growth. Like a good friend, compounding becomes more generous the longer you stay with it.
Consider this simple illustration:
The 25-Year-Old vs the 40-Year-Old
A 25-year-old invests Rs 10,000 per month for 30 years. At 12 per cent returns, he will get about Rs 3.50 crore
A 40-year-old invests Rs 20,000 per month for 20 years. At 12 per cent return, he will get about Rs 1.70 crore
The younger investor invested half the money, but ended with double the wealth. That’s because time did the heavy lifting.
The Three Phases of Your Retirement Wealth Journey
Every retirement plan goes through three clear phases:
A] The Accumulation Phase (20s to 40s): This is where early investing shines. You have time, income growth, and an ability to take risks.
B] The Consolidation Phase (40s to 50s): Here, you refine your portfolio, reduce mistakes, and build stability.
C] The Distribution Phase (60+): This is about income, not wealth creation. The earlier you start Phase A, the smoother and stronger Phase C becomes.
Why Most People Delay Retirement Planning
Despite knowing the importance, many people delay. The reasons are usually the following.
“I don’t earn enough yet.”
“I will start after buying a house.”
“I need to clear loans first.”
“Let me wait for a salary hike.”
“Markets are high; I will start later.”
But the delay can prove to be expensive. Every postponed year means your future self must work harder, invest more, or settle for less.
The Retirement Planning Manifesto calls this the Cost of Delay Curve — delaying by just five years can shrink your retirement corpus by 30–40 per cent.
The Behavioural Advantage of Starting Early
Starting early is not just a financial strategy — it is a behavioural breakthrough. These are the benefits of starting early.
1. It Builds Discipline: Once you start a SIP early, it becomes a habit, not a burden.
2. It Reduces Emotional Mistakes: An early investor learns to handle market cycles calmly.
3. It Boosts Confidence: Seeing money grow over time empowers better decisions.
4. It Allows You To Take Calculated Risk: Equity becomes your long-term engine, not a short-term gamble.
Small Steps, Big Future: The Power of Micro Investing
Young investors often feel their savings are “too small to matter.” But small amounts with long duration can outperform large amounts with short duration.
Here’s an example.
Rs 5,000 per month from age 23 has the potential to grow to Rs 1 crore-plus
Rs 3,000 per month from age 22 has the potential to grow to Rs 70–80 lakh
Rs 10,000 per month from age 25 has the potential to grow to Rs 3 crore-plus
In retirement planning, small is not small. Small is powerful when done early.
Why Equity Is Essential When You Start Early
Inflation is the biggest threat to retirement. To beat inflation over 20–30 years, you need a growth engine — and that is equity.
Starting early gives you time to absorb volatility, time for systematic investment plans (SIPs) to benefit from rupee-cost averaging, a longer runway for compounding, and flexibility to rebalance later.
Income Grows — Your Retirement Plan Must Grow with It
A simple rule for young earners is that they should increase their SIPs by at least 10 per cent every year. This mirrors their salary growth and multiplies their corpus dramatically.
The Retirement Planning Manifesto shows that a 10 per cent annual increase can create 2–3 times more wealth than a flat SIP.
Starting early is not about being financially aggressive. It is about being financially free later.
An early starter doesn’t fear retirement, doesn’t depend on children, doesn’t make rushed decisions at 50, doesn’t compromise on healthcare or lifestyle, doesn’t outlive their savings.
What If You Didn’t Start Early? It’s Still Not Too Late
It is good to start saving early, but it is never too late to begin.
If you start late, you can still optimize asset allocation, increase savings ratios, extend working years, build annuity income, reduce unnecessary expenses, use catch-up investment strategies
Time is powerful when used early — but discipline is powerful at every age.
From Youth to Senior Years: Time Is Your Silent Partner
Whether you are 25 or 45 or 55, the message is clear: Start early if you can, but start now if you haven’t. Your future self will thank you for every month you did not delay.
Closing Thought
Compounding is the eighth wonder of the world.
But only for those who begin early enough to experience its wonder.
Retirement planning is not about how much you earn — it is about how early you begin and how consistently you continue. That's because in the end, time is the only investment you cannot replace and the one that rewards you the most.
The author is the author of The Retirement Planning Manifesto - The Age of Information Abundance — and Insight Scarcity
