Savings Plan Tips - Planning to Be Work-Free By 45

In India, the typical retirement age is 60 years, but, nowadays, many people wish to retire early at 45. If you desire the same, there are many ways to increase your savings and be work-free by 45 years. Read on to know more about it.

Nowadays, many youngsters realise the importance of financial planning and they start early to fuel their future ambitions. Although the official retirement age is 60 in India, many people plan to retire early and be work free. Retiring early not only gives you plenty of time to follow your dream and live carefree without liabilities but also secures your retirement financially.

But, retiring early is easier said than done. You must either have a large income or an accumulated corpus or you must strategically plan your finances. While the former may not always be easy, especially if you are a salaried employee, you can focus on the latter. The key to retiring early and being work-free by 45 is to have a meticulous financial plan and start investing in the best saving plan from the day you get your first salary.

Here are a few tips to save money for the future and be work-free early.

Prepare a budget and start saving

Making a budget is one of the simplest ways to know exactly how much you are spending every month. Once you list down the expenses, you can categorise them under different heads, including essential, discretionary, and entertainment.

Once you have identified the amount you spend under different heads, make sure to put away a specific percentage of salary towards meeting the essential expenses and try to reduce the other expenses. Make sure that you don’t keep the money idle at home, it is better to invest the same in the schemes of your choice, so that your savings continue to grow.

Choose the right investment

One of the most critical aspects of saving for the future is choosing the right investment instrument. To start with you can invest in simple instruments like bank FD, RD, etc. Once you have ascertained your long-term goals, you must convert your savings into investment. Experts recommend choosing the right investment in line with your goals and time horizon.

For example, for your short-term goals, you can invest in debt funds and debt-related investment schemes. For medium-term and long-term goals, you can have a mix of equity and debt investments. This will not only give stability to your investment portfolio but give you a sense of security and higher returns. Some of the best savings plans that you can consider investing in include, NPS (National Pension Scheme), Mutual Funds, PPF (Public Provident Fund), etc.

Maximise tax-saving

Tax-saving is an integral part of financial planning. It is vital to know about the various tax-saving investments so that you can get maximum benefit. There are plenty of investment schemes like EPF, PPF, NPS, ULIP, ELSS, life insurance policy, 5-year FD that offer tax deduction under Section 80C of the IT Act.

You can also use the insurance and health care expenses for the dependents astutely. This would include getting tax deduction on the health plans under Section 80D of the IT Act. Another important thing to learn about tax-saving is to know if the returns on your investment is taxable or not. For example, an ETF attracts short-term capital gains tax.

Get insurance cover

Just as it is important to invest for your future in various investment schemes that generate returns, it is vital to secure your family’s well-being and financial future against the uncertainties by buying insurance cover. You must invest in a robust life insurance and health insurance policy to get coverage against death and healthcare expenses that may occur anytime. Buying insurance with maturity benefits will provide you additional funds to support your retirement plan.