Start early: The earlier you begin investing in your corpus, the bigger your nest egg will be on retirement. Even a few years' delay can affect your financials considerably. The longer the investment period, the more you will gain from the power of compounding. Say, you invest Rs1,000 today and earn a 10% compounded rate of return each year. In the next year, your investment will be worth Rs1,100 (Rs1,000 + Rs100). And the next year, you will have Rs1,210 (Rs1,100 + Rs110). This way, initially your money will grow at a slower rate, but as the accumulated money starts increasing, the rate of growth climbs up several notches. If you start late, you won't make proportionally less but, rather, much lesser money because you don't let the power of compounding work for you.
Goals and assets: Know your goals. If you marry at 30, you'll probably have a child by the age of 32, who will go to college 20 years later and maybe get married another five years later. While your retirement plan is a long-term goal, your child's education is a shorter-term goal and his/her marriage is a medium-term goal. It is, therefore, not advisable to dip into your retirement savings to finance your child's education or marriage. Keep this in mind and invest in the right places. Put some of your money in equities (money that grows) and some of it in debt funds (money that is safe). Equity investments include all investments in the stock market, including through mutual funds. Debt investments include the money you put in a PPF (public provident fund) account and bank fixed deposits.
The New Pension Scheme (NPS) offers a combination of equity and debt investments. While you're under 40, it makes eminent sense to invest as much as 80% in equities and the rest in bank fixed deposits. As you grow older, more of your money should go into debt investments and less into equities.
Know what your money is doing: Monitor your financial plan on a regular basis to make sure you can achieve your retirement goal. You can do this on your own or seek help from a financial advisor. Make sure your plan meets your investment objectives in changing market and personal conditions.
Don't change the plan: No matter what happens, don't draw down your retirement funds during your working years—unless you must do so because of an emergency or some major change in your life that requires you to spend some of your retirement savings now, even if it means having to make do with less money when you retire.
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