Smarter retirement planning through employee benefits
Whether you’re in your 20s or you’ve been a part of the workforce for a while, it’s never too early or too late for retirement planning. Much like planting a tree, the best time to get started would have been several years ago, and the second best time would be now. But, if you’re unsure about how to go about with retirement planning, here’s a guide to getting started.
Sound investments are key to effective retirement planning and you can invest only what you don’t spend. This is why it’s next to impossible for someone early on in their career to start investing. This is where employee benefits come in to help. Employee benefits include meal vouchers, medical reimbursements and the ilk. Typically reimbursable components, these benefits are prescribed by the Income Tax and help employees save up to 30% in taxes. By opting for some of the most popular employee benefits, you could potentially save up Rs. 80,000 a year.
The next question is where to invest all the money your employee benefits helped you save, and most would agree that investing in an Equity Linked Savings Scheme (ELSS) would be a good idea seeing that the rate of return is good, the lock-in period of three years is not as much as the other available options, and ELSS investments can be declared as an investment under section 80C. There is no upper limit on how much can be invested and you can start with even as little as Rs 500 a month. In addition to this, you can also invest through a Systematic Investment Plan (SIP), which allows you to make investments in small amounts over a period of time instead of investing the entire amount in one go.
Fun fact: Each SIP investment is considered a fresh one and features a separate three-year lock-in.
Believe it or not, even if you’re retirement planning activities are not on the front foot, there’s a chance the government and your employer are making sure you’re not left out in the cold during your golden years. If your salary structure has always featured an Employee Provident Fund (EPF) contribution, then the good news is that your employer has been contributing the same amount every month and that’s only been increasing every year with your salary. By the time you’re ready to retire it’s likely that you’ll have a sizeable sum waiting for you at the other end.
Which brings us (rather late in the article, but bear with us) to the first (and probably only) rule of retirement planning — start early. While your parents and relatives would have clubbed you over the head with that piece of advice, adding that saving up should be a habit (which is 100% accurate by the way) a second reason to start early is the power of compound interest.
Simply put, all the money you put away generates interest, creating more money, which when reinvested creates even more money, which when reinvested… well, you get the drift. All the money you’ve put away as an SIP or an ELSS along with your EPF contributions, thanks to the power of compound interest, has got your retirement planning activities sorted to keep you afloat and even beat inflation. But is there anything else you think you could do ensure your retirement has been planned for? Let us know in the comments.
