25 November 2020 | 4 min read

Ways To Save Money For Early Retirement


You are living in a fool’s paradise if you think impulsive shopping and incessantly spending money is all that you need to do in your 20s. Spoiler alert: life won’t sort itself out unless you start inculcating saving habits along with consciously making an effort to stash away money for the future. If you are serious about saving for retirement, your 20s is the best time to start doing it.

Learning about money-saving tips may seem daunting at first given there are various jargon and acronyms you need to understand, but once you start your early plan for retirement, it falls in place.

Moreover, this is one thing you need to do once you start earning in your 20s. And once you factor in inflation by the time you retire, you will quickly need a lot of money to live life peacefully. You already know the reasons why you need to save early, let us guide you through the ways to save money.

1. Start With Just A Small Amount But Start Early

Save small amount – Live More Zone

A piece of golden advice when you have started earning is to open an account and save at least 20% of your income. This necessarily shouldn’t be for your retirement saving but as a general thumb rule, make sure you some amount. As you gradually start earning more and have the leeway of surplus income, start making smart decisions and accordingly opening up accounts that are a part of your retirement savings plan.

Moreover, it is necessary to include retirement as part of your long-term savings goal. Like you would save for your first car or home.

2. Diversify Your Investment Portfolio

Investment Portfolio – Live More Zone

Any retirement savings plan is incomplete without having a diverse portfolio. Ideally, your investment plan should have a mix of debt and equity funds. However, when you start saving early, you have the option of taking a chance with your money, and thus your portfolio should be 70% equity and 30% debt. Equities pose a high risk but also give handsome and huge returns compared to fixed assets like real estate, gold or debt. You can re-arrange this as your investments mature and you reach your saving goals.

3. Factor in Inflation To Your Target Amount

Set a target amount – Live More Zone

Before you start saving for retirement, calculate how much you will need to live the lifestyle you have right now. For instance, if you are making around INR 25,000 per month right now, you will quickly need INR 1.45 lakh per month to afford your current lifestyle if you plan to retire after thirty years. This is being calculated with the inflation rate at 6%.

Accordingly, if you earn more than this amount, you should do the maths and set your saving targets.

4. Look For High-Risk Investment Vehicles

High-Risk Investment Vehicles – Live More Zone

We told you to diversify your portfolio, but which investment options are better for your retirement saving scheme? The answer is Mutual Funds and Ulips. While Mutual Funds vary in their range, return and risk, Ulips or Unit Linked Insurance Plans work best for people who are looking for investment and life cover both.

When you go for Mutual Funds, if you have a high-risk appetite, your retirement saving plan should include stocks that will be invested in equity funds. This could easily give you a return of 12-15% per annum depending on the market conditions. However, if you are looking for safer investments, Mutual Funds with a hybrid of debt, equity will work best for you.

5. Don’t Underestimate Government Schemes

Government Schemes – Live More Zone

When you are figuring out and charting a plan as to where all you can invest your money to save for the future, don’t forget the National Pension System (NPS), Public Provident Fund (PPF) and Employee Provident Fund (EPF).

Under the NPS, you can invest INR 6,000 per year in different Tier accounts and asset classes depending on your income and risk appetite. The Tier accounts factor in the time when you can withdraw money. There are two tiers, with Tier 1 account only viable for withdrawal after retirement. A Government-initiated saving scheme, investing in NPS also means your money will be eligible for tax benefits.

6. Create A Separate Saving Fund For Retirement

Saving Fund For Retirement – Live More Zone

Last but certainly not the least, when you start early planning for retirement, you are also looking at other financial goals like saving for your first car, home, creating a corpus fund for your child’s education and others. The smart thing to do is to have a separate fund for all your goals, especially retirement. And make sure this fund is not accessible to you before retirement, or you might end up taking out a little sum here and there for trivial situations.

If you are someone who understands money, saving for retirement won’t be a problem for you, but if you struggle with money talk, consulting a financial advisor is a smart thing to do. However, you start investing in your retirement fund; the key is to start early and start smart.



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