Retirement is the period when you no longer work and you have to depend on financial resources that was accumulated during your working life to meet all your expenses and financial goals. So, it’s crucial to ensure full financial preparedness before you retire. By making some important financial moves in your 20s, you can lay the foundation for building a strong financial base for your retirement. Here are 3 big financial moves for your retirement that you should take in your 20s.

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Start Investing For Your Retirement In Your 20s

Are you aware of the power of compounding and how it can help you grow your wealth when you invest for a longer period? Let’s understand about the benefit of compounding with the help of an example. Suppose at the age of 25 you start investing Rs 5,000 per month in a mutual fund SIP that may give a return of 12 per cent per annum. So, on your retirement at the age of 60, you’ll get a corpus of Rs 3.25 crore. Now, let’s change the scenario. Suppose you started investing at the age of 35 in an SIP but increased the monthly investment size to Rs 15,000 per month. At the age of 60, assuming the return rate of 12 per cent per annum, you’ll get a corpus of Rs 2.85 crore. Thus, it shows that by starting investing at an early age you can build a bigger corpus for your retirement compared to starting investment at a later age even if you invest a bigger amount.

So, as soon as you start your career, you should start investing towards your retirement goals. It can help you create a bigger retirement corpus and you can also target for an early retirement in your career.

Take A Term Life Insurance Policy At An Early Age

What’s the right age to take a life insurance policy? The answer is, as soon as you become financially independent, you should get life insurance cover. The best thing about getting a life term policy at an early age is that the premium of the life insurance policy usually remains fixed for the rest of the tenure. So, if you buy a term policy at an early age then the applicable premium would be lower and the same premium you have to pay for the remaining period. Also, at a young age people are normally free from ailments and diseases like BP, diabetes, etc. so it is easier to get the term policy compared to getting a policy at a later age when you become susceptible to health-related issues.

Make Your Retirement Plan In Your 20s

By making your retirement plan at an early age, i.e., in your 20s, you can fix your other financial goals accordingly. Depending on your income growth, change in lifestyle and financial responsibilities you can adjust your retirement goals at different stages in your life. Early retirement planning can help you with extra time to make necessary adjustments in the future if something goes wrong.

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Finally

Taking the necessary financial moves towards your retirement in your 20s, it can allow you to take higher risks when investing and thus look for a bigger return. Taking retirement steps at an early age can also help you avoid unnecessary debt in your career and thus enjoy your life with greater financial freedom.

The author is an independent financial journalist.