Are you excited about your retirement life or second life? How will your retirement look like? This is something, which you should spend some time on. Everybody wants to have a comfortable retirement, but to achieve the last goal of the life, one need to plan it properly. Financial Planning can help you get your retirement life or second life in order. You want to take a planned approach to achieving financial success and be independent even in your non-earning years.

Every person needs his or her own financial plan in order to enjoy his or her “second life” – so why live your entire life without properly planning your finances? It is so easy to say that as long as you are earning, your monthly salary will cover your expenses, and whatever you save will invest, and on your retirement, hopefully, you will have enough set aside to live the rest of your life maintaining a good lifestyle.

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But we all know that there are 2 things that go against this thought:

The first is Inflation – the one thing that kills the value of your money.

One needs to understand the impact of inflation on retirement corpus.

Something that costs you Rs. 100 today could cost you Rs. 110 tomorrow. Imagine what it would cost you when you retire after so many years. An example to bring out the point as that you are incurring monthly household expenses today Rs 30,000 and years to retirement are remaining 15 years assuming inflation rate 8% p.a., your household expenses at the time of retirement, to maintain the same life style: a staggering Rs 95,165 per month.

Start Saving Now

The old way of thinking was to pay off the mortgage, pay for kid’s college, and then save for retirement. That worked fine when people didn’t live as long, but nowadays you can expect to survive 20-40 years in retirement. You may spend as many years in retirement as you did in career. If you don’t start saving now you are throwing away the power of compounding returns which is one of the most powerful tools in your hand to kill the inflation for achieving financial security.

The sooner you begin saving, the less you must save each month to reach any savings goal making the process easier to accomplish. The longer you wait, the more you must save each month making it harder to get started and harder to reach goal. The single biggest advantage which can be derived from making an early start is the opportunity to benefit from the power of compounding. Put simply, this is the ability of an asset to generate returns, which are reinvested for generating higher returns. Longer time horizons enhance the compounding benefits.

An illustration will help us better understand the same.

Start saving for retirement at age 25, so that even if you wish to retire 60, you have an investment horizon of 35 years.

The longer the investment horizon, the longer you can save and benefit from compounding. If at the age of 25, you start investing Rs. 3,000 per month at the rate of 10% compounding then the maturity amount (when you are 60 years of age) will be Rs.1,02,77,680;alternatively if you commence the same investment at the age of 32, then the maturity value at the age of 60 will be Rs. 50,89,457. Imagine that – that half the money for just seven year of procrastination. 

So are you going to start to build your retirement security now so you can take the easy, secure path, or are you going to wait until later when saving is easier but the goal is harder to achieve.

The second is the improper investment of your money.

This is what can kill the potential future value of your money when it is needed the most

A retirement portfolio built on FDs and endowment polices made sense for earlier generations when life expectancies were short and inflation was tame, but that isn’t situation facing today’s retirees. As your retirement planning is long term commitment and time in hand is like a powerful sword and you should not worry about investing in equity which is risky in the short run and quite safe in the long run.

Today’s retirees must not only preserve capital, but they must grow it as well to preserve purchasing power. The result is now we encourage equity investing to add a growth component to your portfolio to offset inflation.

Because of these 2 major factors, it is absolutely essential to have a strong Financial Plan that will give you awareness on where you stand today, and what steps you need to take to achieve your future financial goals.

We are sure that most of you have not taken your own retirement seriously till now because you feel that it a tedious job but actually it is one of the most important part of your life.

Please remember; Retirement Planning is an ongoing, lifelong process that takes decades of commitment in order to receive the final pay-off. But once it is achieved it will ensure that you have sufficient income every month to make your day to day expenses.

You might be 25 today, so what? You need to plan for retirement at this very moment. This is because you have sufficient number of years to save money for your retirement and it is most likely that you would achieve your retirement goal. And even if your age is around 45 – 50 and have not thought about retirement planning, you should start it immediately otherwise you might not be able to achieve your retirement goal and hence you might have to work a little bit longer than you would have thought off.

So, the key to a successful is way to predict the future is to create second life or retirement life is to start early in order to make the most of your financial life!

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Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an M.com from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at info@prudentfp.in
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