Retirement planning: Why you should start investing in your 20s to reap real benefits of compounding
Start investing, even with small amounts, but stay invested for the long term. Here are some reasons why it's never too early to start planning for your retirement: As per Albert Einstein, 'compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn't … pays it'.
The key is time in the market – the longer the amount of time available for your money to compound, the more powerful the effect. “Starting a systematic investment of a small amount monthly at age 20 and continuing investment till 60 can potentially double the retirement corpus vis-à-vis starting the same investment at age 25 and staying invested till 60," said Kurian Jose, CEO, of Tata Pension Management. “Investing even with small amounts and staying invested for the long term can be a powerful wealth-building strategy.
For example, had you invested even Rs. 5,000 per month in an SIP (systematic investment plan) that gave you an average annual return of 13% over 25 years, you could have built a corpus of over ₹1 crore. This is nothing but the power of compounding," said Kavitha Subramanian, Co-founder, of Upstox The earlier you start saving and investing, the more likely you are to achieve financial freedom.
Starting early allows you to contribute smaller amounts to your retirement savings each month. The longer you wait, the more you may need to contribute to catch up, making it potentially more challenging to incorporate into your budget. “It is important to build a habit of saving and staying invested.
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