- Dependent age (0-25): With the craze and the passion for excellence in education, majority of young people now-a-days start earning at the age of around 25 years. The first 25 years of a person's age are classified as dependent age because one is dependent on the support of the parents for most of his/her survival needs.
- Interdependent age (25-60): The interdependent age begins when one starts earning independently either through job, profession or entrepreneurship. An individual becomes financially independent, but is dependent on others as far as independent use of time is concerned. For example, if one wants a long break from work he/she is normally constrained by the exigencies of job/ profession. The upper age limit of interdependent age needs to be flexible as some people do retire early in life.
- Independent Age (60-80+): The average survival age of an Indian is estimated to be around 80 years by 2012, due to the improvement in health services. The post retirement age is known as the independent age or the 'Golden age' because one is in full command over everything. We can spend our time and money according to our own will. We can indulge in many pastimes which we continue to postpone due to paucity of time during our active work life. But to take full advantage of the golden period we must plan for our retirement as early as possible.
Most investors are in a dilemma about the timing of Retirement Planning? Retirement planning should start early in one's life to make use of the 'Power of compounding'. Our investments should fetch handsome returns to take care of post retirement period, when regular avenues of income from salary/ business are not available. As investors we must remember the 'Rule of 72', which is the layman's calculator to find out the rate of return needed for doubling your investment: 72/R = No. of years to double the investment. If you put your money in a fixed deposit @9% pa, your investment doubles in 8 years, but if you invest your money in equities @18% pa (the average return given by sensex since inception), your money could double in about 4 years. Who said equities are not for retirement planning! Just apply the power of compounding and make your 'Goden Age' worth the enjoyment.
1 comment:
Its unfortunate that most of the young people, who are not covered by pension schemes are very complacent about retirement planning. They do not want to plan for the future at the young age, they rather splurge money on unneccessary luxeries.
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