Yes, everyone in the industry, even the bests, will tell you to start planning for retirement right away. And it’s a good advice to an extent. If you start early, you can earn higher return because of the power of compounding.
However, I would advise you to focus on the present. You have limited time and money, and the retirement planning isn’t always the best investment for you.
“The best way to predict future is to create it.” Today’s youth is diligent, indefatigable and focused in matters regarding their future. They know what’s best for them, and they also know the supreme path to achieve it. Due to obvious reasons, they begin saving and investing for their senescence as soon as they lay their hands on their first salary. They love financial independence, and they can’t risk losing it even in their old age. Hence, a hefty sum from their account gets transferred to retirement planning every month.
BUT, is this the right thing to do? Should they actually be stressing over their retirement which is almost 35-40 years distant, or should they rather concentrate on building their present?
I will suggest going for the latter. Concentrate on your present, because it decides your future.
Why, you ask? Here are 6 reasons why millennials shouldn’t do retirement planning:
1. It’s the time to follow your heart and take risks
With a lot of successful start-ups coming up, it is possible that you too have such an idea in your mind. You might want to leave your 9-5 job and fully dive into the world of entrepreneurship or set up your own side business.
However, nothing comes for free and you need a hefty investment for such implementations. In such cases, assess your idea and if you feel it is worth the efforts, go for it! Make a short term savings goal, SAVE, and pursue your passion.
2. Invest in yourself
Prioritize yourself while you still can. Learn that extra skill or that foreign language with the extra bucks rather than saving it up for retirement. Knowledge is wealth, and it’s always worth it.
Go for the MBA degree or masters course that can boost your career growth. Increase your brand value, in layman’s words. Think of the long-term – that would increase your salary and you would be able to save better.
Moreover, do not ignore your health in a quest to earn more and save more. After all, investing in yourself can help you both personally and professionally. It proves to a potential employer you’ve got what it takes to succeed. Moreover, maintaining a healthy lifestyle ensures you can enjoy your retired years when they finally do come about. You don’t want to spend all your savings on medical bills. Do you?
3. Clear your debts first
The escalated fees of the colleges today need no introduction. Most of the millenials are just out of college, with a huge education load on their head. They attempt at doing both the jobs (clearing debts and saving) simultaneously, which turns out to be a mistake. A sweeping recommendation to save more for retirement doesn’t account for important factors like our debt balances. Keep in mind that getting a handle on college debt first is a valid reason for sacrificing potential retirement income.
Moreover, most of the people contributing to these plans subsequently can’t pay down debt after monthly expenses. Meanwhile, the interest rate on credit card debt likely exceeds the rate you can earn in your retirement account, which means the growth of your debt balance will forever outpace your long-term savings.
4. Prepare for emergencies
If you fall sick severely tomorrow and need Rs. 1 lakh for treatment, do you have it? If not, your money is not managed and prioritized well enough.
A part of becoming financially independent means allocating a percentage of savings for emergencies. But unfortunately, most of the youth is so busy saving for retirement, that they forget other more important things. They tend to forget that ultimately, life insurance is about relieving the anxiety of leaving behind a family to face financial crisis. If you don’t have insurance and you’ve put all of your hard earned money in NPS and PPFs, your spouse would miss out on any insurance proceeds and would need to pay tax on withdrawals from the retirement account before accessing the money.
5. Plan and accomplish short-term goals.
Since we’ve always been told to save for retirement if we didn’t want uncomfortable latter years, we make it as the ultimate goal. Yes, we’ll probably need money stashed away a long time from now, but young people will face many different expenses before that time comes.
For example, plan to buy your own house before you begin saving for your retirement. It gives a feeling of contentment and security. You could also save money for your child’s education, your own car, your personal office and what not!
While we shouldn’t completely abandon long-term savings, we should take a second to think about how best to use our extra notes—both to establish our financial security and to find more fulfilling careers and happier lives.
6. Find a perfect job.
Doing a job just for money could seem good initially, but it becomes a burden later. Just because the company pays you a lot and you can save for your retirement comfortably, you shouldn’t do it. You are still young, so get the right skills, brush up your competence and shed off your nervousness. Apply in companies, give interviews and search for a job that you really like doing. The pay will increase gradually; it is your satisfaction that you should prioritize.
To put it in a nutshell, do not restrict yourself from exploring new possibilities, discovering your unknown capabilities and taking new risks. You are still young, and you still have a long road to tread for your retirement. Don’t make this journey dull and tiresome; instead fill it with a lot of mesmerizing good and bad experiences. Learn to prioritize you money and use it in the right place! After all, what would you do with a comfortable senescence, without having some refreshing memories of the former years?