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Starting late for your retirement saving? Here’s how you can catch up

Everyone should begin saving for retirement no matter how old they are

January 19, 2021 / 08:28 AM IST

Retirement is a non-negotiable reality for almost everyone. Many young people brush aside the topic of retirement saving as they feel it’s too early to think and plan for something that is so far off into the future.

Add to it the other more near-term financial commitments such as buying a house, car, and funding children’s education, and it’s very easy to lose track of retirement as a critical goal.

If you are yet to give retirement the importance it deserves and have no savings earmarked for that goal, you need to pull up your socks. And this is not only for those who aren’t young. Everyone should begin saving for retirement no matter how old they are. In fact, it’s best to begin retirement savings with the first pay cheque you get.

Starting off on retirement saving

If you are a salaried individual, then the very first thing that can be tagged to your retirement savings is your EPF (employees’ provident fund) account. As you know, a part of your salary is deducted automatically every month and is invested in the EPF account. Generally, even your employer matches your EPF contributions. EPF is an excellent product as savings are made automatically. Many people dip into their retirement corpus (i.e., EPF corpus) for various needs such as house purchase, at the time of job switch, etc. But ideally, it should not be done. EPF is a solid product that should be kept aside exclusively as part of retirement savings.


So, EPF is already getting funded from your salary deductions. But will it be enough? Most probably not. You need to save more for retirement. How much and where you invest depends on what kind of an investor you are. If you are a conservative investor, then you would be better off investing more in debt instruments. But if you are even a moderately aggressive investor, then you can invest a major chunk of your additional retirement savings in equity as well. More so if you are young and have several years (or decades) before you decide to call it a day.

Investing based on risk appetite

If you belong to the conservative investor’s category, then you can increase your EPF contributions voluntarily via VPF (Voluntary Provident Fund). Now, VPF contributions generate similar returns to EPF and can help you further bulk up your PF corpus. At times, employers do not have an EPF facility for employees. If that’s the case, you can contribute to a PPF (public provident fund) account too.

A combination of EPF plus VPF and/or PPF is a good start for building retirement corpus if you have nothing to begin with. But as these PF instruments are debt products, you need to understand that their returns will not be enough to beat inflation. So, you need to also invest in equity instruments, which are known to deliver inflation-beating returns in the long run.

If you are a balanced or an aggressive investor, then you can start investing regularly in equity funds as well. Then, your portfolio will have a combination of debt (EPF, VPF, PPF) and equity instruments (equity funds).

If you are just starting out, it is strongly advised to have a major chunk of your regular investments going towards equity funds. This allocation will help you earn higher returns for long durations of time as you have several decades in front of you and that way, you can benefit from compounding of returns.

Also read: Simple retirement products suitable for most savers

Increase savings over the years

As your income rises, make sure you increase your regular retirement investments as well. You should begin saving for retirement as soon as can. It’s easier said than done and the realization of the importance of retirement savings happens at different times for different people. But the earlier one starts, the better it is. By starting early, the power of compounding works in your favour for more years and you can create a large retirement corpus by investing even small amounts.

But what if you are not so young and still have no retirement savings? Don’t worry. Just begin today. Don’t delay any further. Since you are older, chances are that you earn more and, hence, the time lost in not investing earlier can be made up to some extent by investing more in the remaining years. That’s how the math works.

I leave you with a gentle reminder that don’t be complacent about retirement planning. Don’t be under the assumption that you can defer it without any problem. You need to begin now if you haven’t. If you have doubts, better sit with a financial planner and figure out how much you need to invest for retirement. It will be an eye-opening exercise.
Dev Ashish The writer is the founder of
first published: Jan 18, 2021 09:20 am
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