As the retirement age typically falls around 60, it may make you think there is ample time for retirement planning. However, early you plan, the better the preparation. One can build adequate financial cushioning for retirement when planned timely and meticulously. So, young First-Time Earners should set goals and follow a disciplined approach to reach them.

If you start financial planning and investing from the first salary or when you are young, it can go a long way to build a strong shield against uncertainties. However, it may not be for first-time or young earners to plan for retirement as there could be other critical financial needs before that. 

Amol Joshi, a founder of Plan Rupee, a financial planning and investment firm, says it is hard for first-time earners to plan and start investing for retirement. “All major financial goals come before retirement, like a dream bike, car, exotic vacations, wedding expenses, property purchase, and other family or children-related commitments.” He adds, “It is a good idea to plan for these goals first and then after a few years plan for retirement.”  

However, even if it may look ill-timed for retirement planning, an early and disciplined investment can make a huge difference in achieving pre-retirement goals.

What Is The Right Age To Start Planning For Retirement? 

Kamlesh Rao, MD & CEO of Aditya Birla Sun Life Insurance, says, “There is no specific age to start planning for retirement. However, the earlier you start, the better. Time is a powerful ally when it comes to growing your savings. Ideally, start as soon as you have a steady income and financial stability, even if it is a small amount. The power of compounding can significantly benefit those who start early.” 

Compounding works best in the long term, and with disciplined savings and investment from the start of your career, your financial corpus may grow multifold.  

Factors To Consider Before Planning A Secure Retirement 

The most crucial aspect of retirement planning is to have a clear idea of the monthly savings and expenditures and to know how much corpus is needed after retirement, factoring in the inflation. Rao opines, “Before planning a secure retirement, consider inflation, risk tolerance, longevity, medical expenses, insurance coverage, tax implications, etc. These factors are crucial in ensuring your retirement savings are sufficient and protected from unforeseen events.” 

How To Start Investment Planning? 

“First-time earners can start by setting clear financial goals, creating a budget that prioritises savings and taking advantage of employer-sponsored retirement plans. They should explore investment options, stay disciplined, and build an emergency fund to protect their retirement savings”, says Rao. Budgeting, financial discipline, and an emergency fund are critical not only for retirement planning but also for achieving other financial goals. If one has yet to start planning for retirement, they may incorporate these habits in financial planning. 

According to Joshi, one should calculate the monthly expenses besides the equated monthly instalments (EMIs) and adjust the costs for inflation till retirement age. Further, work out the inflation-adjusted corpus for a period that will last you, say around 20-25 years after retiring at 60. Then do a backward calculation for the funds required from now till retirement to create a corpus. After zeroing in on the goals and the time horizon, the next step is to take action.  

Joshi says, “Achieving these goals needs proper allocation of money. After planning for all the goals, if you are left with a surplus (amount), start with one or two Systematic Investment Plans (SIPs) in multi-cap funds till you get to the actual retirement planning.” He adds that if one has a horizon of 10-15 years, then multi-cap, mid-cap or small-cap mutual funds could be an option. Also, with every salary hike, increase the SIP investments. 

Rao concludes that first-time earners should develop a savings plan for retirement as soon as they become financially stable or have a steady income and should stay committed and disciplined until they reach their goals.