National Youth Day, celebrated on January 12, honours Swami Vivekananda and his ideas on the participation of young people in the modern world while upholding their values. It serves as a reminder to start planning early for retirement and achieve financial freedom. The earlier you start, there is a chance you retire comfortably.
Retirement may seem very distant for those who are still in their twenties. Most youngsters who have just started their careers don’t want to think of the eventuality that their monthly salary may stop someday.
It is riskier to not invest at all. So, start investing now and stay invested to build long-term wealth. Start investing, even with small amounts, but stay invested for the long term.
Here are some reasons why it’s never too early to start planning for your retirement:
1)Compounding
As per Albert Einstein, ‘compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it’. The key is time in the market – the longer the amount of time available for your money to compound, the more powerful the effect. “Starting a systematic investment of a small amount monthly at age 20 and continuing investment till 60 can potentially double the retirement corpus vis-à-vis starting the same investment at age 25 and staying invested till 60,” said Kurian Jose, CEO, of Tata Pension Management.
“Investing even with small amounts and staying invested for the long term can be a powerful wealth-building strategy. For example, had you invested even Rs. 5,000 per month in an SIP (systematic investment plan) that gave you an average annual return of 13% over 25 years, you could have built a corpus of over ₹1 crore. This is nothing but the power of compounding,” said Kavitha Subramanian, Co-founder, of Upstox
2) Financial Independence
The earlier you start saving and investing, the more likely you are to achieve financial freedom.
3) Lower Contribution Amounts
Starting early allows you to contribute smaller amounts to your retirement savings each month. The longer you wait, the more you may need to contribute to catch up, making it potentially more challenging to incorporate into your budget. “It is important to build a habit of saving and staying invested. We can always top up the saving amounts upon receipt of large amounts of funds due to bonuses, windfall gains, inheritance, etc.,” said Kurian Jose.
4) Tax Advantages
Certain retirement-oriented investments like the National Pension System (NPS) offer tax advantages. Contributions to NPS are tax-deductible, providing additional incentives for early retirement planning.
National Youth Day 2024
The birth anniversary of Swami Vivekananda is celebrated across India as National Youth Day, to honour one of the greatest philosophers and spiritual leaders. It also marks his ideas on how the young should participate in the modern world while upholding their values.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Published: 12 Jan 2024, 06:25 AM IST