Right time to start retirement planning

The median age of Indians is currently less than 30 and most of them, who are earning, believe that they have a lot of time to plan for retirement. Other things such as car, house, international vacation take priority and they tend to believe that investment made in the provident fund (PF) will take care of their second inning.

However, the case may or not be the same as other factors such as inflation, return provided by PF, your health condition, etc would also play a major role. Hence, when it comes to your retirement, do not depend upon your luck and better plan for it in advance.

One of the biggest factors that we tend to ignore while procrastinating for retirement planning is inflation. The average inflation that is wholesale price index (WPI) over the last 35 years in India has been around 7.6 per cent. Nonetheless, this cannot be used by us, as personal inflation is different from WPI. Personal inflation is our lifestyle inflation that includes education, entertainment, travel, electronic gadgets, and others that purely depends upon the lifestyle that we follow.  

Keeping this in mind, it is wise for us to infer our retirement age along with the amount that would be needed to sustain the same standard of living, after considering inflation.

The amount you need at retirement

If your age is 30 and currently, if you spend Rs 30,000 every month, then when you turn 60, you would require Rs 1,72,000 every month to maintain the same standard of living, assuming your lifestyle inflation is at 6 per cent.

Again, assuming that after retirement, you will live for 25 years and you do not have any other source of income, in that case, you would approximately need Rs 3.72 crore, when you turn 60 years. You can create this corpus by investing as little as Rs 10,000 every month in a fund that could generate 12 per cent per annum. Nonetheless, if you plan at the age of 50, you need to invest around Rs 42,000 every month.

Therefore, the earlier you start saving and investing in funds, the more comfortable you will be able to plan for your retirement. Hence, you should start investing, right with your first salary. However, if you haven’t started till now, you can still begin anytime as the clock is ticking!