What could happen if you delay planning for your retirement years?

Your younger years are often advertised as times of care-free fun. While it’s true that you should seize every moment and make the most of your present, you should also think about your future and security. Despite working towards your immediate goals like going on a trip with your friends or buying for your first bike or car, you must also think about your retirement. When you are in your 20s or 30s, retirement may seem too far away. Nonetheless, to enjoy a financially comfortable and safe retirement, you need to start planning for it early. 

Contrary to the well-accepted trend, saving for your retirement should start from the time you land your first job. Several financial instruments can help you reach your short-term goals while also tending to your retirement needs. But just as there are umpteen benefits of starting your retirement planning, there is a long list of drawbacks for not doing so. Read on to know the consequences of delayed retirement saving: 

Lower return on investments

Financial instruments such as Mutual Funds, Stocks, RDs (Recurring Deposit) and FDs (Fixed Deposits) give you higher returns when you invest in them over a long period of time. By opting for them in your early 20s or 30s and maintaining them for a long duration, you can avail better yield and financial security. But if you invest in them late, your return will be way lower, or you’ll have to wait longer to reap the benefits of your investment. 

So, start putting your savings in avenues like FDs, RD, Mutual Funds and even traditional schemes such as PPF or NPS for good returns. With HDFC Bank’s Investment Services Account, you can easily carry out transactions and have complete control over your Mutual Funds via NetBanking. Regardless of the medium of investment, the idea is to not lose out on the benefit of compounding and stay consistent with your retirement savings from early on. 

Read on to learn how to invest in Mutual Funds

Higher insurance premiums

In today’s day and age, it is wise to invest in health and life insurance schemes. Considering the uncontrollable medical inflation and the fragility of health in general, investing in insurance is an intelligent and almost indisputable option. While you can opt for these schemes at any point in time, buying them during your 20s gives you the advantage of lower insurance premiums. This way, you end up saving on premiums and also create a security net for yourself and your family at an early age. 

But if you buy an insurance plan at an older age, you’ll have to pay higher premiums. This is because as your age increases, there is a higher chance of your health declining and you claiming insurance. Therefore, insurers charge a higher premium. 

Missing out on tax benefits

It is no news that retirement plans and savings schemes provide lucrative tax benefits. Instead of losing a major chunk of your income to taxes, it is prudent to divert money into financial instruments that are ideal for your retirement needs. For instance, saving in life and health insurance schemes and investment vehicles like Mutual Funds, PPF, NPS etc. can bring you great tax savings under section 80C and 80 D of the Income Tax Act, 1961. 

You can even consider investing in HDFC Bank’s Retirement Savings Fund or tax-saving pension schemes such as the Tax Saver FD to build a sizable retirement corpus.  

Losing out on the possibility of early retirement

Not having enough savings for a comfortable retirement could require you to work that many years longer. This could also culminate into debts owing to a lack of funds or income-earning opportunities. To avoid such hassles in your late 50s or 60s, it is necessary to design and have your retirement fund up and ready. With a sizable retirement pool, you can also retire earlier than planned and cater to other life interests in your golden years. 

Retirement planning helps in achieving the optimum balance between current aspirations and future needs. Whereas, delays in financial planning can reduce your total retirement corpus by a large margin even though the total amount invested is the same over time. It is therefore pertinent to start saving early to have your money work to your advantage later. Start small, start early, and make your retirement journey a smooth one!

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* Terms and Conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific professional advice from before you take any/refrain from any action.