Retirement planning is an important aspect of personal financial planning and is incomplete without it.It is a forward-looking planning.Early Retirement Plan is also Very Important to Avail the Advantage of Time Value of Money.
Lets get an idea with an example of comparison
Let's compare two people : Mr.X and Mr.Y.
Mr.X starts saving Rs.750 per year from his age of 15 and stops investing to his nest egg at the age of 30.
On the other hand, Mr.Y. starts investing Rs.5000 per year when he is 30 and continues investing this amount every year till he is 60.
If both earn 15 % post-tax return per annum on their investments, who will have more
wealth when they retire at age 60.
Mr.X his Rs 750 annual savings between age 15 and 30 will aggregate to Rs.27.12
lakhs by age 60, whereas, Mr.Y ' s Rs 5000 annual savings between age 30 and 60 will
aggregate Rs 25 lakhs.
From the difference,we can understand why retirement planning start at an early age. People are spending more time in retirement, say, 16-20 years of life after retirement. Private pension and government benefits are not sufficient to maintain and cover the standard of living. Inflation is a big question. Therefore, it may be assumed that inflation may diminish the purchasing power of retirement savings.
Lets get an idea with an example of comparison
Let's compare two people : Mr.X and Mr.Y.
Mr.X starts saving Rs.750 per year from his age of 15 and stops investing to his nest egg at the age of 30.
On the other hand, Mr.Y. starts investing Rs.5000 per year when he is 30 and continues investing this amount every year till he is 60.
If both earn 15 % post-tax return per annum on their investments, who will have more
wealth when they retire at age 60.
Mr.X his Rs 750 annual savings between age 15 and 30 will aggregate to Rs.27.12
lakhs by age 60, whereas, Mr.Y ' s Rs 5000 annual savings between age 30 and 60 will
aggregate Rs 25 lakhs.
From the difference,we can understand why retirement planning start at an early age. People are spending more time in retirement, say, 16-20 years of life after retirement. Private pension and government benefits are not sufficient to maintain and cover the standard of living. Inflation is a big question. Therefore, it may be assumed that inflation may diminish the purchasing power of retirement savings.
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