Thanks to consumerism and our constant need to signal status, millennials are said to be the most broke generation of all time. We focus on building a network on social media, but don’t have the net worth to stand on our own two feet. With little motivation to save up and secure our future, building a retirement fund seems like a far-fetched dream. And yet, it’s undeniably one of the most important things in life and the sooner we start, the better. Here’s a five-step process to help you build yours:
Start by imagining what kind of lifestyle you want to lead after your retirement. Do you see yourself driving fancy cars, living in a lavish property and going on foreign holidays every year with your family? If yes, then you need to set aside a lot more funds than if your goal is to just lead a simple life where your basic needs are met.
Don’t underestimate the power of compounding. Most people start planning for their retirement much later in life when they’re already stuck with a lot of liabilities like funding their children’s education or marriage, paying EMIs for life and health insurance or returning loans taken to buy a house or car. When you’re young, you’re not shackled by these responsibilities and have nothing to lose. Hence, it’s wise to start investing a little money every month to build a retirement corpus that multiplies itself over time.
Sign Up For NPS
National Pension Scheme (NPS) is a voluntary retirement savings scheme introduced by the government to encourage citizens to save up for retirement and reduce financial dependence among the aged population. It offers a higher interest rate than banks and allows income tax benefits upto an investment of Rs. 2 lakhs in a given financial year. Any Indian citizen between the ages 18 to 60 can open an NPS.
Pay Yourself First
Be smart about the way you use your salary. Before making frivolous expenses or paying off liabilities, make sure you pay yourself first. Set an ambitious target for how much you’d like to save every month and only spend the money left over. To make this easier, simply automate your retirement contributions.
Invest In Government Schemes
Apart from NPS, you can also put your money in government bonds as they guarantee interest returns of at least 8% over the tenure of a decade or more. Another investment alternative is immediate annuity scheme through insurance companies, which involves making a one-time premium payment and receiving monthly pay-outs right away.
Also read: How To Have The Talk With Your Teen And Not Make It Awkward
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