When we hear the word retirement, most of us are visualizing “Retirement” as the end of working life.
Is this the right conception?
What was the definition of “retirement”?
This particular retirement concept was there 20-25 years ago when most of the people were in government jobs and were receiving pension after age 58 or 60 after completion of longer job tenure of 35 to 40 years. And thereafter they are spending time with the family and their grandchildren without doing any work.
What is the definition of “retirement” now?
At present time very limited government jobs are available. Even those government jobs do not have a reasonable lifelong pension which is enough to sustain the basic necessities for living after age 60.
Now the meaning of retirement has changed completely and the new terminology is very much popular which has introduced new words “Financial Freedom” or “Financial Security”. Also, the meaning of retirement does not mean “stop working”. People continue working after financial freedom or financial security to pursue their passion or the life they want to live.
What should be the right age for retirement?
In general, people have a concept of retiring by age 58 or 60 but nowadays even after 60 there is no pension in government & private sector nor any government scheme is giving any monthly stipend for survival. Only your saved money is going to help you in future to sustain the basic necessities. So people started building pension at the age 18 or from the age when they started earning.
Earning avenues were very limited 20-25 years ago and now due to the technological revolution, people are making money at a faster pace and achieving financial security and financial freedom at an early age by building corpus and wealth. Further, they are pursuing their passion by actively working.
So it is up to us to decide the age of retirement.
You have two options
- Retire at age 60 with the help of pension schemes
- Decide your retirement age by self
1. Option 1 – Retire at age 58 or 60 by help of pension schemes
Many pension schemes are available in the market by which you can get the lump sum corpus amount at age 60 and thereafter a lifelong monthly pension. In which National Pension System (NPS) scheme is very popular and is run by the government of India. LIC and a few banks are also offering few pension plans.
Pros
- You will get a big corpus amount at age 60 if start at an early age.
- You will get a lifelong pension after age 60.
- The corpus amount is tax-free.
- You will get tax benefits in both old & new tax regimes every year.
- Reasonably secured schemes like NPS, LIC, etc. are available
Cons
- These schemes are lock-in schemes, you can not withdraw money till age 60.
- Few schemes are offering withdraw facility after few years with very limited amount.
- If you withdraw early then it attracts tax.
- In case of emergency, this saved fund is of no use for you.
- In case of death only, it will allow to withdraw the full money.
2. Option 2 – Decide your retirement age by self
If you are good at taking control of your money and willing to learn then you can decide your retirement age by yourself. You need to be disciplined in earning, saving and investing. And more importantly, you must know how to plan, monitor and achieve your retirement. Even being a non-accounting person you can do it with ease.
In any pension scheme, the pension scheme providers are investing in market driven schemes, especially in stock market related schemes. In the same way, an individual can invest their saved money regularly in secured, semi-secured and risk investment scheme directly and can accumulate the required corpus amount well before age 60. This corpus will generate monthly income through secured schemes where you can get assured monthly income from your invested corpus. Same time the full corpus will always be available to you whereas, in pension schemes, you can get a limited amount after the age 60.
Pros:
- You can make a goal to achieve your retirement corpus at the desired age.
- This age can be much earlier than age 60 or well before age 45.
- Accordingly, you can earn, save and invest money so that at targeted age you can able to achieve the required corpus.
- The saved corpus always will be in your control and will be accessible.
- In case of an absolute emergency, the corpus will be available.
- Based on your earnings, you can increase your investment amount any time.
- You can decide at what rate you want to invest based on available market schemes.
Cons:
- The earnings from the investment will be taxable.
- In very limited scheme you can get 80C rebate that also maximum upto 1.5 Lakhs.
- If you are not disciplined in earning & savings then you cannot achieve the desired corpus.
- If you have spending habit then saving and investing will be difficult.
Nowadays most of people are deciding when they want to be financially secure and further financially free. They are also deciding the age when they want to retire or become financially free and accordingly they are working on their career growth.
In this option, one can decide and can try to achieve according to their wishes.
What is recommended?
The recommended way is that one can work on option-2 “Decide your retirement age by self” and parallelly invest little amount regularly and incrementally in Option 1 if the age is less than 40.
If the age is 40+ then also one can choose both the option but the main focus should always be on Option-2.
And if the age is 48+ then only Option-2 “Decide your retirement age by self” will be recommended.
How to start working on Option-1 ( By pension schemes )
Many pension schemes are available in the market which you can explore. NPS (National Pension System ) which is run by the government of India is the most popular scheme. You can get elaborated details on the internet. One of the Youtube videos can help you to understand more about the NPS in detail.
How to start working on Option-2 ( by self )
You can explore the option-2 “Decide your retirement age by yourself” immediately.
- First you check how much money corpus you have.
- Check presently how much earnings per month your all investments are generating.
- Now decide the age you want to retire.
- Accordingly, calculate the monthly/ yearly saving target.
- Set goals.
- Monitor till you achieve
Look like you cannot able to do such calculations. But it is so easy. You need to just learn and focus to achieve it. My blog post “How to build Financial Security by normal earnings – Step by step guide” will help you to understand how you can do it so easily and every aspect of it.
At whatever age you are, do not hesitate to work on your retirement corpus as this is going to give you financial ease at your early age. This you can achieve by learning, earning and disciplined saving & investing habits.
