Recently, the news of a famous comedian and Bollywood actor reaching Tihar Jail in a check bounce case was in the headlines. This incident once again raised the question that how do even seemingly successful people get stuck in financial crunch?
The truth is that good income and secure future are not the same thing. Real security comes from proper planning. Especially for retirement, when salary stops but expenses do not.
What does retirement planning mean?
Retirement planning is not just about saving money. This means creating a fund that can run your life comfortably even after leaving the job. Inflation increases expenses every year, so preparation in advance is necessary. Often at the age of 30 people say, there is still a lot of time. But this thinking can prove costly later.
Why is it important to start early?
If you start late, inflation makes your target bigger. You get less benefit from compounding, you have to invest more money from your pocket. Whereas starting early makes your money work for you.
Travel from 5 lakh to 1.5 crore
Suppose you invested Rs 5 lakh in lump sum in a mutual fund at the age of 30. If you get 12% annual return and the money remains invested for 30 years, then by the age of 60 this amount can become around Rs 1.5 crore.
How to get Rs 1.75 lakh per month after retirement?
On retirement, invest this Rs 1.5 crore in a relatively safe option, such as a conservative hybrid fund, and assume an 8% return. If you withdraw Rs 1.75 lakh every month through Systematic Withdrawal Plan (SWP), then you can withdraw a total of Rs 2.10 crore in 10 years. During this period the remaining money will also keep increasing.
What is the real mantra?
This is not magic, but the power of time and compounding. The sooner you start, the less burden you will face. If you delay, you will have to invest more to achieve the same goal.