Why Is It Necessary to Start Retirement Planning as Soon as You Start a Job?
The feeling of getting your first job after completing your education can be surreal. You are no longer dependent on anyone. You can be free to pursue your interests and hobbies like travelling, reading, or attending clubs on weekends, while your job takes care of your finances.
In all this excitement, you might forget to think about making a retirement plan. While you might think it’s too early to plan for your retirement, experts worldwide have corroborated that people should ideally begin retirement planning as they receive their first paycheque. And here are a few reasons why you must start thinking about your retirement early.
When you are young and earning well, it is easy to get distracted with purchasing unnecessary goods or reckless purchases. You might spend on a pair of new shoes and clothes when you already have these items in abundance. With new-found financial liberty, you may continue this cycle of overspending for a long time.
On the contrary, having an investment obligation such as a monthly SIP or insurance premium ensures that you get to spend the money after you have met these obligations. Therefore, a retirement plan can instil financial discipline in you.
Low Recurring Expenses
When you are young, you may not have many responsibilities like taking care of your spouse or kids’ expenses. Therefore, your recurring expenses, such as the monthly rents, electricity bills, grocery bills, etc., can be much lower than someone with a family.
Therefore, it would be easier to save a large chunk of your earnings now. Once you are settled with a family, things can be different.
High Risk-Taking Capability
Since age is by your side, you can take risks to seek higher returns on your investments. You can regularly invest a considerable amount of your salary into market-linked products. You can keep a long investment horizon and ignore the short-term volatilities of the market.
Since you have newly entered the workforce, you are less likely to be in debt. Before you start accumulating debt such as home loans, car loans, credit cards, etc., you should start planning your retirement. Once your retirement plan is in order, you can always take loans for luxury purchases as your salary increases.
Compounding of Wealth
Another significant benefit of early retirement planning is that you can leverage the benefit of time to build a more substantial corpus. When you start investing early in different instruments to accomplish your retirement goals, you can allow your money to grow faster with a compounding effect.
You can start with a small monthly contribution towards the payment of insurance premium, and it can silently grow into a significant amount by the time you retire. The more time you give, the more your wealth will compound.
There is nothing wrong with having multiple focus areas while taking your first job. No one asks you to think of doomsday from the date of your first appointment. You need to enjoy life to the fullest. All you need to do is simultaneously work towards a retirement plan to help you have peace of mind in your sunset years.