As a young person standing at the threshold of your career, you may not think too much about your retirement. You would obviously be more excited about the long career lying ahead of you. However, your retirement is a reality and even though right now it seems like a lifetime away, saving for it is mandatory. The earlier you begin, the better it is for you. So what are the best retirement strategies available to you? Should you invest in a pension plan or should you start a PPF account? Take a look at this article to see what your best options are.
Pension strategies for young people
As a youngster under 20, you may still be studying or may have just begun your professional journey. You may still have a few student loans that you are repaying. At such times, is it practical for you to put some money away in a pension plan for your retirement? The answer is a big, fat yes! The logic behind this is simple – the earlier you start, the larger your fund will grow. Let us take a look at some of the pension strategies for young people.
- Pension plans: The pension plans, also known as the retirement plans, are popular saving tools available from the leading insurance providers in India. The pension plans allow you to save small amounts of money for a long time. Your money is invested in safe market tools and it grows even further. And since a pension plan is an insurance product, it also comes with a death benefit component. So if anything happens to you within the policy period, your loved ones will get the sum assured. Upon maturation, the pension plan gives you a lump sum amount of money and the rest of the accumulated fund is given in parts to you and becomes a regular source of income for you.
- Deferred annuity plans: As a young professional, you can start investing in a deferred annuity plan which is a kind of pension plan. This allows you to be disciplined about your finances and keep a small amount of money away each month for your future.
- Investments: Apart from the pension plans, you can also invest some money in mutual funds, PPF accounts and also in post office savings schemes like the NCS. You will be able to save and build up a large corpus which you can use for your retirement as well as for your other life goals such as your wedding, your children’s college fees, etc. You can also use a part of your accumulated corpus later on to buy an immediate annuity plan. An immediate annuity plan is a type of pension plan where you pay a lump sum amount of money after you retire and set up a regular income source for yourself. It therefore is important to start saving early as you can then build up a fund which will aid you in every step of your life.
Things to consider when building up a retirement corpus :
Whether you choose to invest in a deferred annuity pension plan or you want to lock your money into a PPF account, there are a few things you must keep in mind. Firstly, you have to work on a tight budget. As a 20-year old, your salary won’t be too high. You therefore have to balance your finances in such a way that it is possible for you to put some money away each month. It may be difficult, but it is not impossible. Secondly, do not make the mistake of thinking that your retirement is way too far away. It never is too early to start saving for your future and you too must take stock as soon as possible. This will help you in finding the best pension plan as well as securing your own financial future.
To sum it up :
To sum it up, as a 20-year-old, you must start saving in a pension plan or in any other kind of investment to ensure your retirement phase is smooth. Saving money is a good habit and if you begin early, you will become a successful money manager your whole life and that will prove to be very beneficial for you. Good luck!