Retirement Planning: Seven Factors To Consider Before You Start (2025)

Table of Contents

A mix of equity, debt and government-backed schemes ensures both growth and stability. Start Early, Stay Consistent Calculate Your Retirement Corpus Inflation, Healthcare Costs Diversify Your Investment Portfolio Consider Employer Retirement Benefits Don’t Ignore Tax Efficiency Plan For Retirement Income Stream

Personal FinanceRetirement Planning: Seven Factors To Consider Before You Start

A mix of equity, debt and government-backed schemes ensures both growth and stability.

Personal Finance Desk

14 Apr 2025, 08:58 AM IST i

14 Apr 2025, 08:58 AM IST

Retirement Planning: Seven Factors To Consider Before You Start (3)

The earlier you start, the more time your money gets to grow through the power of compounding. (Photo: Unsplash)

Retirement may seem like a distant milestone, but planning for it should not be.

Whether you're in your early 30s or nearing your 50s, building a secure financial future requires foresight and consistent action. Retirement is about ensuring you can maintain your lifestyle, meet healthcare needs and enjoy peace of mind without financial stress.

The earlier you start planning, the easier it becomes to build a reliable corpus. So, before you dive into SIPs, pension plans or EPF calculations, here is a look at the key factors you should consider before beginning your retirement planning journey.

Start Early, Stay Consistent

The earlier you start, the more time your money gets to grow through the power of compounding. According to the Securities and Exchange Board of India's Financial Education Booklet, initiating savings at age 25, with a retirement goal at 60, provides a 35-year investment horizon. This extended period enables even modest, regular investments in instruments like Public Provident Fund, mutual funds or the National Pension System to potentially yield significant returns over time.

Calculate Your Retirement Corpus

One of the most crucial steps is to estimate how much you will need after you retire. The general rule of thumb is to aim for a retirement corpus of 20–25 times your annual expenses at the time of retirement. This estimate should account for inflation, lifestyle choices, dependents and unexpected emergencies.

Inflation, Healthcare Costs

Inflation silently erodes purchasing power. A pension of Rs 50,000 today may not be enough 20 years later. According to RBI data, India's average inflation rate over the past decade has hovered between 4% and 6%. Healthcare inflation stands at 14% annually.

Diversify Your Investment Portfolio

Don't put all your eggs in one basket. A mix of equity, debt and government-backed schemes ensures both growth and stability. Young investors may lean more towards equities, while older ones should shift to safer instruments like Senior Citizen Savings Scheme, Post Office Monthly Income Scheme or debt mutual funds.

Consider Employer Retirement Benefits

Understand and factor in employer contributions to Employees' Provident Fund, gratuity and superannuation. According to the EPFO data, EPF offers an interest rate of 8.25% (FY 2023-24). If you are switching jobs, make sure to transfer and not withdraw your PF amount to preserve the compounding benefit.

Don’t Ignore Tax Efficiency

Retirement planning is also about saving smartly. Use tax-saving avenues like Section 80C (PPF, ELSS, NPS), Section 80CCD (1B) for additional NPS contributions, and Section 10(10D) for tax-free insurance returns. NPS also allows partial withdrawal for specific needs before retirement.

Plan For Retirement Income Stream

Once retired, you'll need a regular income. Options include annuities, systematic withdrawal plans or dividend-paying investments. Products like the Atal Pension Yojana or life annuity plans from LIC or IRDA-approved insurers offer assured monthly pensions.