One reason why retirement planning is looked upon with much apprehension and even distaste is because most of you are late off the starting blocks. And when you start late, achieving the desired or rather the required investment corpus becomes all the more difficult. Citing this some of you tend to further postpone this exercise which results into financial and emotional strain. So the secret here is to make an early start. Let us understand the benefits of starting the retirement planning exercise at an early stage in life with the help of an illustration.
Early bird gets a bigger pie
|Particulars ||Ram ||Laxman ||Bharat |
|Present age (years) ||25 ||30 ||35 |
|Retirement age (years) ||60 ||60 ||60 |
|Investment tenure (years) ||35 ||30 ||25 |
|Monthly investment (Rs) ||7,000 ||7,000 ||7,000 |
|Returns per annum ||10% ||10% ||10% |
|Sum accumulated (Rs) ||2,65,76,466 ||1,58,23,415 ||92,87,834 |
| || || || |
In the above illustration, Mr Ram starts his retirement planning exercise at the age of 25 years with a monthly investment of Rs 7,000. Assuming a 10% rate of return and his retirement age of 60 years, Mr Ram has investment tenure of 35 years. This helps him accumulate Rs 2.66 crore by the time he retires. On the other hand, Mr Laxman starts his retirement planning 5 years later than Mr Ram. Being late in kicking off his retirement planning process, Mr Laxman is able to accumulate Rs 1.58 crore only. And finally, Mr Bharat, the late boomer of the lot starts his retirement planning at the age of 35 years and manages to accumulate a meagre Rs 92 lakh.
Thus, it is evident from the above that an early start to your retirement planning can fetch you a higher accumulated sum.