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Ideal Time to Start Saving for Retirement

Planning retirement and saving strategies at an early age might sound a little strange to many. But the earlier you start, the lesser would be the load on your pocket later. You tend to have lesser financial obligations in your 20s and with a little control over your spending habits; you will be able to save a lot.

With all the burden of buying an apartment/building a home, buying a car, obligations toward kids and aged parents and a lot more other expenses, saving might become a little difficult on your part in your 30s. So, what is the best time to plan for your retirement?

Be aware of the power of compounding. The sooner you start, the more you will gain, as your money will get more time to grow.

Start with your first job: Every single penny counts

The ideal time to start planning and saving for your retirement is when you start your first job. You may not be earning a lot and might want to wait a few more years before you start saving. But no money is small when it comes to saving. Don’t wait till you are old enough to search for retirement communities near me before you start saving. Every single penny saved will grow with time and give you returns. So even if the amount is small, start saving something right from the moment you start earning.

  • Employees’ Provident Fund (EPF): If your employer must deduct 12% of your basic + dearness allowance as EPF mandatorily from your salary, don’t crib. That’s your first step towards planning for your retirement. The employer will also make an equal contribution. You can contribute towards EPF, however, the employer is free not to match the contribution beyond 12%. Contribution into EPF up to Rs. 1,50,000 per annum also helps you save on taxes u/s 80C of the Income Tax Act. Currently, EPF investments draw an interest rate of 8% per annum, and you can withdraw the amount in a lump sum on retirement.

  • Public Provident Fund (PPF): People who do not have the benefit of EPF can invest into PPF, which like EPF draws and interest rate of 8% and is a good tax saving instrument. Bear in mind, irrespective of the scheme, the total investment limit that is exempted from tax u/s 80C is Rs 1,50,000.  Like EPF, PPF too comes with a 15-year lock-in period.

  • Post Office Monthly Income Scheme (POMIS): POMIS will entitle you to earn an interest rate of 7.8% per annum. However, it has a maximum limit of Rs 4.5 lakh in case of single ownership and a limit of Rs 9 lakh in case of joint ownership.

  • National Savings Certificate (NSC): You can also buy NSC from the nearest post office to save for retirement while enjoying tax benefits under Section 80C of the Income Tax Act. NCSs have two fixed maturity periods (5 and 10 years) and the rate of interest is 8.1% per annum.

  • Mutual funds (MFs): MFs are great if you are planning to put your money for a longer time frame. However, it is open to market risks and you should be able to monitor your assets regularly.

  • Sovereign Gold Bond (SGB): SGB is a good retirement planning option where the minimum limit on investment is one gram and the maximum is up to 4 kg per person for each financial year. However, SGBs are open to market risks, the profits earned are taxable and also there is a lock-in period of 5 years.

  • Fixed Deposit (FD): Fixed deposits are a great way to save your money as you know the exact amount of return you will get at the time of maturity and you can set your financial goals accordingly. FD (Fixed Deposit) is a good saving option to go with where you can earn a high-interest rate on your money without bearing the risks of market fluctuations.

It is never too late

Even if your retirement is approaching and you haven’t saved enough for that, you can start saving now for the later years of your life. You may even start saving in your 60s to meet the financial obligations of your 70s or 80s. You will also get better returns on your money as senior citizen fixed deposit interest rates are higher.

What if you’ve already retired? There are other a number of saving options for retired people too like The Pradhan Mantri Vaya Vandana Yojana, where you can invest up to Rs 15 lakh for a term of 10 years and earn an 8% interest rate to get a monthly income of up to Rs 10,000. You can also invest in the Senior Citizen Saving Scheme, which gives you an interest rate of 8.3% and has maturity term of five years, which can be extended for another three years. Systematic Withdrawal Plans in mutual funds are also a good way to get a regular income.

As said earlier, FDs are evergreen. NBFCs FD gives a high interest-rate of 8.2% to senior citizens, which is 0.35% over and above the regular interest rates for FDs. Use the online Fixed Deposit Interest Calculator to find out how much you can gain from your FDs.

Written By

Arwind Sharma is a financial advisor with an experience of more than 7 years. He has worked for topmost financial firms in India and has been a visiting faculty at many reputed institutes in India. Currently based in Pune, Arwind Sharma is a name to reckon with when it comes to financial management for big brands. A post-graduate in business economics, he is an alumni of Princeton University, USA. During his free time, Arwind teaches children from marginalised sections of society and also work on his blog.



  1. James

    June 27, 2018 at 7:54 am

    Saving for your retirement should be as early as your first job! Valid points made here, thanks for sharing.

  2. Tracy

    June 28, 2018 at 7:27 am

    Really good tips. I save money all the time for other expenses. A good way to save money is looking at your finances and expenses. Tax is a big part of it. Knowing the ins and out of it is really important.

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