Why Should I Save For Retirement Planning in My 20s?

Save For Retirement Planning in 20s

Beneficial Start
In the midst of all these conditions, if an individual is able to make a start to their retirement planning efforts they have already won half the battle. They can ensure that at least a large part of their lives in old age will be spent in better times because they had the foresight to start at an early age. The amounts that are used for retirement planning will come useful at some stage and provide a great relief helping them enjoy their life even at that age.

Even small amounts are welcome at this stage; in fact, these are the foundations on which the whole process is built. Since one has the benefit of the time these little sums grow and the benefits are reaped at a later date. The key is to ensure that the start is made and after that, there is a continuation on the path that has been chosen because this will be the way to go about the entire process.

Time Does The Work
If retirement planning is started in the twenties there are at least 30 years left for the time when one retires. This is good enough to ensure that whatever sum is invested keeps growing with each passing day. A lot of the work of retirement planning in this case is done by time itself. The financial impact is so great that small sums seem to be huge when they actually come back to the individual.

There is also another reason why time is so important. It allows a person to take risks and ensure that there is larger growth for them in their capital. A person, who has a long-term horizon, can invest in equities and they can put a large sum of their portfolio in equities. This would mean that if these give a higher return than most other assets then a huge corpus would be built up. One can also take a longer time frame view and ensure that the ups and downs in the market, as well as the economy, are taken in the stride. Availability of time will give the investor a choice of a larger number of routes over the years.

Power Of Compounding
The growth will be dependent upon the power of compounding. The power of compounding is the growth of the assets each year with the earnings being reinvested so that the growth takes place each succeeding year on a larger base. If the gains or the earnings are withdrawn then the base will remain the same. However, retirement planning requires the use of the power of compounding so that the larger base provides a greater return for the individual.

The planning has to be made in such a manner that the routes chosen are such that the money can stay there for a long time. It is even better if the money is inaccessible as one will be able to ensure that this is not taken out and used in some other area. This kind of discipline is essential for the successful achievement of retirement planning objectives.

How To Go About The Process?
At this young age, retirement planning might not seem to be an important part of planning however one must make the effort to get things started. This is the first part of the success that one will experience. In terms of planning one must look for instruments that are long-range in nature.

A large part of the investment will go towards equities and equity-oriented instruments. A part of the savings that are made in compulsory avenues like provident funds would be going towards debt due to the basic nature of such investments. But one can take the necessary amount of risk and hence look at equities.

At this stage, there is no major responsibility and also loans and other borrowings are also less hence there is no major pressure on funds but there are other expenses, that take their place and hence some control there is essential.