Planning your retirement is nothing but planning your finances today, so that you can stay comfortable after you retire.
It is never to early to start planning your finances. However, it is better to start early to enjoy the magic of compounding.

Importance

It usually happens that we tend to overspend when we don't have a proper plan. Extra money lying with us only tempts us to spend unreasonably.

So, it is important to plan your finance according to your needs and wants. The first thing to be done is differentiating your assets and liabilities.

Starting early will give you a longer time horizon and will help your investments grow and improve your portfolio across time.

Planning your finances will help you meet your future goals. One has to set an clear goals considering inflation and standard of his living. Goals set should be realistic and and time bound gloals is necessary to track your progress which will encourage you to reach your goal.

Power of compounding

Time plays a vital role when it comes to investments. Power of compounding is more magical when you start investing early.

Let's site an example. Say Ajay and Vijay (both aged 25) start their investments. Ajay invests 2,500 every month and Vijay starts his investment at the age of 35 and he invests Rs 5000 every month.

Down the line when they both turn 45, Ajay's saving amount turns to Rs 22 lakh, while Vijay's stands at Rs 11.09 lakh. Considering a realistic 12% return.

So, this is magic of compounding. Investing regularly ..

Inflation

While setting goals one has to keep in mind that the value of money diminishes over time, as inflation eats into the value.

Investment options

Creating the right mix will depend on your age. Early starters can give priority to high risk instruments like equities, MF linked equities. This is because in the long run equities provide you with good returns.

People who are risk averse can look at other avenues like PPF, EPF, ELSS which are safe considerably safe instruments with tax savings facility.

First time equity investors can look at RGESS which has the tax benefit under 80CCG. New retail investors with total income up to 12 lakh are eligible to invest in this. Know more

As you approach your retirement time keep shuffling your investment from high risk to low risk.

Here are few investment options for retired individuals.

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