Retirement can’t wait: Invest today for freedom tomorrow

Retirement planning is a long-term financial project that one must begin at the earliest or as soon as one starts earning. Primarily, it is about deciding how much money one needs at a regular interval to lead a dignified life when salary or remuneration ceases to come.

What makes retirement planning important?

How long one will survive after retirement is the most important question that comes to mind when thinking about retirement planning. The longer the years, the bigger the corpus you need. Essentially, it helps you maintain your standard of living in the twilight years of life. In order to do so, you don’t have to compromise your dreams and happiness simply because you have no inflow of funds.

Notably, India’s overall life expectancy is increasing every year, touching 72.5 years in 2025, compared to 70.2 years in 2020. In addition, healthcare expenditure, especially for the middle-class and upper-middle-class families, is also increasing year on year. Studies over the past decades have shown that ‘out-of-pocket expenditure’ (OOPE) in health is driving 3-7% of Indian households to ‘below-the-poverty line’ every year. Though the Centre’s latest National Health Account (NHA) estimates show a sharp decline in ‘out-of-pocket’ spending for a period between 2013-14 and 2021-22, a little over 39% of the total spending is still OOPE. It signifies a major challenge for the lower-and-middle-income families.

So, growing life expectancy, rising personal healthcare spending, higher living cost, and shrinking social security net make it important for people to plan their retirement life, expecting comparatively longer elderly years than before.

When do we start investing?

Retirement planning should ideally begin as soon as you start earning a regular income. The earlier you start, the greater your potential returns. Starting in your late 20s or around 30 years of age is considered ideal, as it gives your investments sufficient time to grow and benefit from the power of compounding. As your salary or income increases, it is important to step up your retirement contributions. This helps you stay ahead of inflation and cushion against future income fluctuations or financial shocks. If you start late, you will have less time for your money to grow. In such cases, you may need to invest a larger amount upfront or allocate a higher portion of your income to catch up. Additionally, regular portfolio reviews are essential to ensure your investments are on track to meet your retirement goals. If the growth is not satisfactory, consider portfolio rebalancing to realign with your objectives.

How much we should aim for?

One must consider several factors such as the investor’s risk appetite, present income, current expenses, savings, expected future income, and estimated future expenditure to determine the required retirement income and then choose a suitable scheme which matches the risk and return profile for the investment. It must also factor in unexpected shocks such as geopolitical conflicts, economic recession, market crash, and personal accidents while estimating future income. More importantly, average life expectancy is also a critical factor that must also be taken into account before reaching the required retirement income.

What are the options?

At present, various pension plans and schemes are available in market. Most of them are launched by mutual fund houses, insurance companies and the National Pension System (NPS). People can choose among them based on their life goals, present income, investment cycle, growth potential, and risk appetite.

Why Mutual Funds matter?

Mutual funds offer a well-diversified investment avenue by allocating money across multiple asset classes such as equities, bonds, fixed-income securities, commodities, gold ETFs, REITs, and even government-backed tax-saving instruments. This diversification helps mutual funds withstand market volatility and economic shocks while providing the potential for steady, long-term growth. For retirement planning, investors can choose mutual fund retirement schemes through either a Systematic Investment Plan (SIP) or a lump-sum investment. SIPs are particularly effective as they allow you to start small, invest regularly, and gradually build a substantial retirement corpus over time. As your income grows, you can step up your SIP contributions to keep pace with inflation and future financial needs. SIPs also offer flexibility, you can start, pause, modify, or resume investments digitally based on your financial situation. At the end of your investment tenure, you have multiple options to access your retirement corp

Disclaimer: This disclaimer informs readers that the views, thoughts, and opinions expressed in the article belong solely to the author, and not necessarily to the author's employer, organization, committee, or other group or individual. The information in this article alone is not sufficient and should not be used for the development or implementation of an investment strategy. The sectors mentioned herein are used to explain the concept and is for illustration purpose only. Past performance may or may not be sustainable in future and is not a guarantee of any future returns. Neither the Sponsors/the AMC/ the Trustee Company/ their associates/ any person connected with it, accepts any liability arising from the use of this information.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

(Views are personal; the author is MD & CEO at LIC Mutual Fund AMC)