What does retirement mean to you? Is it a situation where you continue your posh lifestyle, go out on international tours, buy toys for your grandchildren...etc? Or is it a situation where you will have sleepless nights worrying about every penny spent wondering how the ends would meet? 

If your choice is the latter I would prefer you to stop reading this and go for something else which might interest you. For the rest, this is an eye-opener. Even I never thought of Pension planning because I am only 22 years old and In my mindset, I thought, why the hell? I am not anyway going to retire anytime soon! This notion of mine was corrected by an article I read month’s ago. I will take you into the world of pension planning. This article will help you live your life KING SIZE even after you retire. Guaranteed...well if you follow it, Of course  

WHY RETIREMENT PLANNING?
There is one thing retirement does provide, hell a lot of time to do what you always wanted. There were many things that you wanted to do.. I am sure that we won’t be able to fulfill even half of that due to our hectic work schedule. And for that you need sufficient money. There comes retirement planning to the rescue. You will have plenty of time during those years to go back to what you want to do in life. If you have started saving early, by the time you reach 50 you will have all the money you need to enjoy the time you want to fulfill your dreams. 

Why wait for 60 or 65 to retire?
If you have planned your retirement efficiently you can even retire at the age of 45 or 50. Why waste 15 years under someone when you will get more income without working under the comfort of your sweet home! 

Tax Benefit
It also provides tax benefit during your working years too! Yes investments in pension plans are eligible for tax deductions under 80C.
You are likely to live longer than your parents or your grandparents. While that might sound great it may turn out to be a curse if you are stuck without adequate finances.According to the report of Old Age Social and Income community, the panel that drew up the India's Pension Reforms, an average Indian male working in the organised sector is likely to live till the age of 75. That means an average retirement life of 17 years(if he retires at 58,if wife is younger by 5 years;add 5 years to 17). Thus the challenge is within your 30 - 35 work life you will have to make enough money to last 22 years!!! 


Inflation Factor
Inflation is a silent killer. Slowly but steadily it eats up your savings. For e.g. if you can buy goods worth Rs 10000 today, assuming a 5% inflation rate, 15 years later it will be worth only Rs 4810!!! So only if you accumulate enough money to defeat inflation, you will be able to enjoy post retirement. 

Starting Early
Earlier you start saving the better off you will be. Consider the following example.
Pooja begins her investment plan at age of 30. She invests Rs 10000 a year at 10% /annum. She follows this plan till she reaches 40 years and then stops. When she reaches 60, she gets 11.79lakhs, on an actual saving of 1lakh!

Her friend Rekha, who is her same age, begins saving 10 years after pooja, at age 40. Until she is 60 she saves 10,000 a year in the same 10% /annum cumulative interest plan. When Rekha turns 60, she has only Rs 6.3 lakh on an actual saving of 2 lakhs! Although pooja saved for only 10 years, her money compounded over a longer time, and she is 5.49 lakh richer than Rekha who invested double the amount! 

Investment Options
Now that you have understood the importance of retirement planning let us see the different investment options.

Post office Savings Products: Schemes have low minimum investment requirements starting at 500 per annum. They have lock-in periods of varying from 1 to 15 years. They also qualify for tax deductions. They give returns of about 8%.

Mutual funds: In order to get high returns you have to invest in equity. Do keep in mind that the stock market is only for the long term investor. In the long run stock market has always given good returns. Mutual funds are funds where you pay money to professional investors for investing in equity. Rick involved is low here because the money is handled by professionals.

Mutual fund houses have recently started the Mutual fund pension plans. These are debt oriented (investing as loans for companies: low risk) balanced funds that take equity exposure up to 40%, will keep remaining in risk free investments. The popular MF pension plans are Templeton India Pension Plan, UTI retirement benefit pension plan, MAX New York Life Pension plan. All these schemes offer section 80C tax benefits.

Note that the average returns for Mutual funds is around 35-40% compared to bank savings or post office (8-9%).A few lakhs you put in might yield you a crore of rupees when you retire! So people, start saving. It will never burden your work life because there are plans starting at Rs 500/ annum (Rs 42/month)!

Happy retirement  

Disclaimer - I am not directly or indirectly involved in any kind of selling of the products mentioned below. All the data provided are for information only.I do not guarantee the correctness or the success of the same if you have enrolled in any one of the plans mentioned above. 

Cheers
Thomas