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What millennials need to know about retirement planning

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February 24, 2021

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As a millennial, retirement is probably so far off into your future that it feels unnecessary to give it much thought. The assumption is that you have a lot to accomplish by the time you actually need to worry about retirement planning. You have a career to grow, a potential family to start, and even consider buying a house for yourself. So why worry about forty years from now? However, if you give yourself some brain space to consider your retirement planning, it can pay off in a big way down the line. Here's what millennials need to know about planning for retirement. 

1. If you start now, you will enjoy lower premiums for higher coverage 

Starting early gives you an upper edge when it comes to building a savings corpus. One of the benefits is your premium costs. Pension scheme premiums are directly proportional to one's age. If you start investing in a pension scheme in our twenties, you will likely receive lower premiums. The later in life one starts investing in a pension scheme, the higher the premiums will be so the insurance company can mitigate the risks associated with old age.

2. Compounding is your best friend 

The main reason behind the meteoric growth of any kind of savings corpus is compounding. Compounding is fundamentally determined by the time you remain invested, more than anything else. The more you wait, the less time you allow compounding to work its magic on your investments. Starting retirement planning as early as possible can allow your investments to marinate enough and multiply significantly across the decades. In fact, the more you delay beginning saving for retirement or investing in tools that will build your wealth for a comfy retirement, the less likely you are to leverage the power of compounding.

3. You can take advantage of having fewer financial commitments

Being a young working individual means you have fewer financial commitments right now. In your twenties, you have time on your side to make the most of your investments. Although these financial commitments can add pressure as they are goals you are striving towards, you can easily make the time to add a retirement corpus to your financial portfolio. Starting a family, buying a house, building your career all take time and become responsibilities that you cannot escape in the future. Retirement planning only becomes harder to make time for once these goals become actualities.

4. Don't be afraid of high-risk instruments

Retirement planning requires accounting for your day to day expenses, supporting a spouse, covering for inflation costs, and more. To amass such a large corpus, a few risks might be required from your end. These risks refer to market risks like investing in tools that offer high rewards. The younger you are, the higher risk you can afford to take in your financial portfolio. You have time on your hands to correct your investments that underperform. For instance, if you invest in equity mutual funds early in your career and you stay invested for about ten years, you are likely to make the most of this high-risk investment, simply because you had the time on your hands to remain invested in it for the long haul.

5. Ensure your outstanding debt is covered

Debt can dent your savings and prevent you from growing your wealth at the pace it needs to for a comfortable retirement. Retirement is a time in your life when you need not be fretting about outstanding debt. When you are in any kind of debt, ensure you pay it off as soon as possible. In fact, paying off debt in time is part of the essential financial hygiene everybody should be practicing, irrespective of whether they are retirement planning or not. A heavy interest is applied to outstanding dues that haven't been paid in a long time. Hence, it is vital to ensure you pay off debts before they grow to monstrously costly amounts.

6. Conclusion

It makes sense to start retirement planning as soon as you can. The earlier you begin, the cheaper your premiums. The HDFC Life Pension Guaranteed Plan offers you the flexibility to receive as yearly, half-yearly, quarterly, or monthly annuity pay-out. You have to pick the purchase price you prefer to pay as premiums or choose the amount of annuity you want to receive as pay-outs, and the HDFC Life Pension Guaranteed Planwill offer them to you as retirement income at the frequency you desire. Hassle-free retirement savings are assured with the HDFC Life Pension Guaranteed Plan. You can start paying your premiums towards this plan and begin or receive your annuity immediately.

ARN:ED/11/20/21326

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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