InvestorQ : Why is starting early so important in retirement planning?
Pavithra Prabhakaran made post

Why is starting early so important in retirement planning?

Rishita Das answered.
3 years ago
Retirement planning is a very important financial task every individual must undertake to ensure a secure retired life. Retirement planning cannot be same for two individuals for every individual has different income levels, expenses and lifestyle expectation.
Retirement planning, if done at the right time, can help an individual spend his/her twilight years in the best manner possible without compromising on quality of life, basic necessities and lifestyle. For proper retirement planning, one must:
- Evaluate his/her current expenses
- Figure out how much amount will be needed post retirement to have the lifestyle you currently enjoy
- Create an action plan to save more, invest more and invest in financial avenues that will help you reach your corpus amount.
It is important that one plan his/her retirement early as retirement planning works primarily on the concept of compounding interest.
Investopedia defines compounding interest as the interest calculated on the initial principal and the interest which also includes all of the accumulated interest of previous timeframes. Thus, compound interest can be thought of as “interest on interest,” and will make a sum grow at a faster rate than simple interest, which is calculated only on the principal amount.
By investing early, you allow your money to continue being invested- this includes the principal as well as the interest amount earned. With time, your corpus grows and keeps getting reinvested in the market hence, you end up with a significantly large retirement corpus amount.