Retirement Planning Should Begin In Your 20s: Here's What You Can Do Right Now

Your retirement should have all the things planned. Let us show you how.

Move the post-tax corpus into a conservative hybrid or debt mutual fund to reduce risk.

Source : Pixabay

Retirement is a phase of life where planning is utmost necessary. And nowadays several investment plans have gained attention due to it. Due to the rising prices every day, in all sectors, it becomes essential to take care of your money to ease your worries when you retire. Be it your children's education or major life decisions, be it your family's healthcare or your child's wedding, investing and proper planning can help you out. 

Start Early for Maximum Growth

Retirement planning should ideally begin in your 20s. Starting early allows your investment to compound over decades, building a substantial retirement corpus. For instance, a one-time investment of Rs 9,25,000 at an annualised return of 12 per cent can grow to Rs 2.77 crore in 30 years, thanks to the power of compounding.

Choose a Market-Linked Investment in Pre-Retirement Phase

During your earning years, you can take calculated risks and invest in mutual funds or equity-linked instruments for higher returns. Market-linked investments with a long horizon have historically yielded around 12 per cent returns annually. For example:

• Rs 2.5 lakh investment in 35 years grows to Rs 1.31 crore.
• Rs 3.5 lakh investment becomes Rs 1.84 crore.

Monthly SIPs build Massive Corpus

If a lump sum is not feasible, monthly SIPs are highly effective:

• A Rs 10,000 SIP for 32 years grows to Rs 3.89 crore.
• A Rs 15,000 SIP results in a corpus of Rs 5.83 crore.

These results highlight how consistent investing creates wealth over time.

See the Difference a Year Makes

A monthly SIP over 30 years versus 29 years shows a difference of Rs 68.3 lakh in the final corpus.

Staying invested for even one extra year can yield significant gains:

A Rs 4 lakh investment for 34 years grows to Rs 1.88 crore; in 35 years, it becomes Rs 2.11 crore. 

Tax Planning before Retirement

Before starting withdrawals, factor in tax implications. The long-term capital gains tax after a Rs 1.25 lakh exemption is 12.5 per cent. So on Rs 2.67 crore gains, the tax is Rs 33.32 lakh, leaving a post-tax corpus of Rs 2.43 crore.

Shift to Safer Investment Post Retirement

Move the post-tax corpus into a conservative hybrid or debt mutual fund to reduce risk. Begin a Systematic Withdrawal Plan (SWP) with a target return of 7 per cent annually.

Generate Monthly Income for 30 Years

Investing the Rs 2.43 crore corpus in a 7 per cent return fund can yield a monthly income of Rs 1.61 lakh for 30 years. Over this period:

• Total income withdrawn: Rs 5.8 crore
• Corpus left at end: Rs 12,853

This ensures a stable, worry-free retirement with financial independence

Importance Of FD Receipt In Claiming Maturity Amount