Retirement Planning: The Cost of Delay
Retirement isn't an age; it's a financial number. In this lesson, we explore why you can't rely on savings alone, the magic of compounding, and Indian tools like NPS and PPF.
Key Takeaways
- Inflation is the silent killer of retirement savings. Your ₹1 Crore today will be worth much less in 20 years.
- Compounding works best with time. Starting at 25 vs 35 makes a huge difference.
- NPS (National Pension System) is a low-cost, tax-efficient tool for retirement.
- Aim for a Corpus that is 25-30 times your annual expenses.
1. Why Plan for Retirement Now?
Many think retirement is far away. But consider this: Inflation averages 6% in India. If your monthly expense is ₹30,000 today, you will need ₹1.7 Lakhs/month after 30 years to maintain the same lifestyle.
2. The Power of Starting Early
Albert Einstein called Compounding the "Eighth Wonder of the World". Let's see why.
Delaying by 10 years can cost you crores in the final corpus.
3. Tools for Retirement in India
| Instrument | Returns (Approx) | Lock-in | Risk |
|---|---|---|---|
| EPF (Employee PF) | 8.15% | Till Retirement | Low |
| NPS (Market Linked) | 9-12% | Till Age 60 | Moderate |
| PPF (Public PF) | 7.1% | 15 Years | Low (Govt backed) |
NPS Advantage
NPS allows you to invest in equity (stocks) which usually beats inflation over 20-30 years. Plus, you get an extra ₹50,000 tax deduction under 80CCD(1B).
Frequently Asked Questions
How much corpus do I need to retire? ▼
A general rule is 25-30 times your annual expenses . If you spend ₹6 Lakhs/year, aim for ₹1.5 Crores minimum.
Is NPS safe? ▼
Yes, NPS is regulated by PFRDA (a govt body). While market returns fluctuate, the long-term structure reduces risk.
What is the 4% withdrawal rule? ▼
It suggests withdrawing 4% of your corpus in the first year of retirement (and adjusting for inflation later) to make your money last 30 years.