Starting Late Is Not the End of the Story
Plenty of people hit their forties and realise retirement has barely crossed their mind. School fees, home loans and parents who need care usually get in the way. Starting late isn’t ideal, but it beats not starting. Honest numbers and a steady habit go a long way, especially when paired with the right pension plan.
Work Out Where You Stand Today
Before anything else, get a clear picture of your finances. Sit down one evening and note down:
- Savings, fixed deposits, mutual funds and provident fund balances
- Outstanding loans and monthly EMIs
- Existing life and health insurance cover
- Other income, such as rent or a spouse’s pension
- Years remaining until your planned retirement age
Subtract your debts from your assets. That’s your starting line. It might feel a bit uncomfortable, and that’s fine.
Estimate What Retirement Will Really Cost
Here’s a rough start. Plan on spending about 70 to 80 per cent of what you spend now. Your own number could differ, depending on:
- Healthcare, which gets pricier with age
- Inflation, which eats into what your money can buy
- Plans for travel or hobbies
- Dependants who may still need your support
Go a little higher with your estimate. Spare cash is better than a shortfall. To find your retirement corpus, start with your yearly expenses. Project them across your expected retirement years. Include inflation, investment returns and other income, like a pension. Your target should cover as long as your savings need to last
Choose a Suitable Pension Plan
Now compare your options. A good pension plan should suit your appetite for risk and the time you have left. At 40 you’ve got around 20 years. You don’t need to put everything in one place. Keep some money in growth investments and some in safer ones. Your goals, your appetite for risk and your time left decide the split. Before you pick a plan, check what it costs, when you can take money out, how it pays you and what tax you’ll owe. Be careful here, because plenty of plans won’t give you a regular income. NPS exit and withdrawal rules depend on the regulations at that time. Look at three plans before you choose. Still unsure? A SEBI-registered financial adviser can help.
Keep Goals Realistic and Contributions Consistent
Chances are you won’t manage as much as a colleague who started at 25. That’s fine. What counts is an amount you can stick to every month, even a tight one. Set up an auto-debit for the day after your salary lands and the decision is made for you.
Look at the figure again each April, or whenever your pay changes. After a raise or bonus, push the contribution up by even a small amount. Two extra percentage points feels trivial today. Over twenty years the difference is real.
Some give may be needed elsewhere too. Retiring at 62 rather than 60, or taking shorter holidays, will hardly hurt now. It does take a lot of weight off the pot later.
Start Where You Are
Retiring well after 40 takes honesty, not panic. Look at your finances as they are and estimate what you will spend. Pick a pension plan that suits your situation. Then keep paying into it, even when life gets busy. Every month you contribute is one less worry later. You can’t get those earlier years back, but you can start this month.
