6 Benefits of Early Retirement Planning in India


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The idea of early retirement planning is still not very prevalent in India. If we ask people living in towns and villages, we will still find them depending on their children post-retirement. While retired public sector employees can count on their pension, others are completely dependent on their children.  The idea of early retirement planning is something that they do not even think about.

In urban India, early retirement planning is planned by only those who have a risk appetite. The majority of the people think that early retirement planning is nothing but expensive and is mostly opted for by the rich.

6 Benefits of Early Retirement Planning in India

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1. The early you start, the easier it is for you

If you start building your retirement fund when you are young, it will be much easier for you. At a young age, the responsibilities are lesser and the disposable income is higher. As time goes by, the numbers of responsibilities grow; therefore, it gets difficult to save for the retirement years.

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2. Get benefit of tax exemption

Under Section 80C, if you invest in the majority of the pension and investment plans, you will be eligible for tax exemption. Therefore, while planning for your early retirement, you will be able to save deductions on income tax.

3. The power of compounding

If you are into an investment, you already know what compound interest means. It means getting interest on interest. If you invest your money for a longer time, you will get to know how compounding works. And the sooner you do it; the more beneficial it will be for you. You will also be able to invest regularly. By the time your retirement years come, you will have a huge corpus.

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4. Inflation

In the last twenty years, India has seen rising inflation. For example, inflation in 2020 was 6.2%. This means, that if you had earned INR 100 in 2020, the value of the same money in 2021 is INR 94. And when we invest in retirement corpus in old age, it often becomes difficult. With each year, the saving cost increases.  Therefore, when you plan early, the chances of your achieving the target can be higher.

5. Ready to face emergencies

When you have enough funds accumulated, you will very easily be able to face an emergency. Seldom do we realize that life can turn around and the smooth part gets thorny. This is why starting early to invest in your retirement plan can help you in saving enough for your emergency fund.

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6. It is better than FDs

Going back to 2010-2011, the average rate of a bank fixed deposit for up to 5 years used to be 7%. Today, it is around 5.3%. If you are opening a fixed deposit account and keeping your money there, the interest you will receive will be very less. While keeping money in FDs and RDs is not a bad idea but the process of building your retirement corpus will get slower. You should rather choose an early retirement plan that can easily beat inflation.

How to plan for retirement in India?

If you are now convinced about the concept of early retirement planning but wondering how to do it, here is an early retirement planning guide for you.

  • Start investing early: Gone are the days when scopes for employment were less in India. These days, grabbing a well-paying job is not a big deal. And the moment you start earning money, you should start investing your hard-earned money. Although many people believe in saving their money but only saving will not let your funds grow manifolds. On the other hand, several investment schemes in India may help you to grow your money steadily and fast.
  • You should buy a term insurance plan: Life is uncertain and we all are well aware of that. Imagine if you meet with an accident and pass away leaving behind your family that is financially dependent on you. They will certainly not have a smooth life for many years, right? Therefore, buying a term insurance plan that provides a higher sum assured is a prudent choice. Even if something unfortunate happens to you, your family will not have to go through a rough patch.
  • Get a suitable health insurance plan: Getting sick is quite common and if the condition worsens, one may even have to be hospitalized. The worst part of being hospitalized these days is the higher medical bill. Depending on the disease, the medical bill can only increase. Well, many people lose their all hard-earned money in their treatment for critical illnesses. However, if you have a health insurance policy that also provides coverage for critical illness, you will be able to get the right treatment as well as save a lot of your money. The bill within the coverage limit is settled by the insurance company with the hospital.

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Bid adieu to all the outstanding debts

Once you are retired, your source of income gets lesser. Some people just stop having an income. In one such situation, the outstanding debts can be too bothersome for you. Therefore, when your retirement years are approaching, you should start clearing all the debts you have.

The benefits of financial planning from an early stage of life are many. You can also check out some of the best retirement plans that are available online. If you start taking baby steps as soon as you start earning, you will simply not have to worry after your retirement and can simply spend your days indulging in your hobbies.

Read More: Retirement planning Build a separate portfolio for medical expenses

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FAQs on Early Retirement Planning

What is early retirement planning?

Early retirement planning is the process of assessing how much money you will need to retire comfortably and devising a strategy for saving and investing that money so that you may retire earlier than the usual retirement age.

What are the benefits of early retirement planning?

The advantages of early retirement planning include the option to retire sooner than the standard retirement age, having more control over your retirement resources, saving more money in the long run, and enjoying a more comfortable retirement.

When is the best time to start early retirement planning?

Early retirement planning should begin as soon as feasible. The earlier you begin, the more time you have to save and invest your money, which can result in large long-term savings.

What are some common early retirement planning strategies?

Investing in retirement accounts such as 401(k)s and IRAs, decreasing costs to raise savings, working to enhance your income, and seeking the advice of a financial counsellor are all standard early retirement planning tactics.

Can early retirement planning be risky?

Early retirement planning, like any other financial decision, can be dangerous if you do not thoroughly research and prepare your approach. Before committing to a retirement plan, it is critical to analyse your financial circumstances and establish whether early retirement is a reasonable choice for you.

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Jun 12, 2022
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PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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