I know of a wonderful couple who retired at 35. They were working in California for 8 years and were prudent enough to save and invest regularly to build a corpus that allowed them to return to India and pursue their passion - organic farming, yoga, ayurveda and several other social and community building initiatives in the rural India. (If you are curious to know more and want to get some inspiration, check out their blog: http://www.greenlocal.org/whatis)

While most people have a dream, very few plan their finances well enough to make it a reality. The sooner you start planning for your retirement the better. A lot of young people have a myth that it's too early for them to start planning for their retirement. When I share this classic example with them, it wakes them up from their slumber:

• Person A started investing for retirement planning at age 40 and invested Rs 10,000 every month till he was 65 years of age.
• Person B started investing for retirement planning at age 25 and invested Rs 10,000 every month till he was 55 years of age.

Assuming that both got a return of 12% p.a. on their investments, Person A accumulates 1.6 Crores at age 65 while Person B accumulates 5.2 Crores at 55 years of age.

This is possible because of the 'power of compounding', which has been referred as the 'eighth wonder of the world' by Albert Einstein. The sooner you start investing for your retirement, the more time you have for the magic of compounding to work wonders.

There are several investment products that are designed specifically for retirement planning. E.g. Public Provident Fund (PPF), Pension Plans from various Life Insurance companies, The New Pension Scheme etc. You can also build a part of your retirement corpus using mutual funds or buying shares directly from the stock market. There is no one product that fits all, hence discuss your retirement plan with your financial planner.

A few common principles that I would recommend for retirement planning, irrespective of where you invest are:

• Start as early as possible and invest regularly
• Do invest a part of your investments in equities when you are young
• Start switching more towards fixed-returns as you reach closer to your retirement age
• Take adequate inflation into account while you calculate numbers
• Consider the post-tax returns on your investments. Both, pre & post retirement

So, what is your idea of retirement? Do you have an investment plan for it? What do you think is the best investment option for retirement?

I decided to give him a new perspective. I told him that there is a product which offers 20% Guaranteed Returns in first year and additional returns with a choice of about 8% p.a. fixed returns or market-linked returns.

"20% guaranteed returns in first year! Are you sure?" he asked me with a guarded look. "What if I tell you that it is guaranteed by the government of India" I replied. Ajit jumped out of his seat and exclaimed "Tell me more!"

I told Ritesh that on his annual taxable income of Rs 5,00,000 he will be paying an income tax of Rs. 55,000*. However, if he invests Rs 1,00,000 in any of the tax saving products then his income tax payable will come down to Rs 35,000*. Going by the principle of 'a rupee saved = rupee earned', on the investment of Rs 1,00,000 he has made a return of 20% in the first year by saving Rs 20,000. And then depending on where the money is invested, there will be additional returns. For example, PPF will give tax-free returns of 8% p.a. and ELSS Mutual Fund schemes offer high risk, high returns in equities market. Or he could invest in several life insurance products that give a combination of fixed and market-liked returns along with risk cover.

"Oh, you are talking about Section 80C benefit, I knew about it. But frankly, I never saw it from this perspective. From this standpoint, 20% returns in less than one year does sound very attractive!" said Ritesh

"20% is just the current number for you. Tax savings can range from 10% to 30%, if your income increases this year then you could even save and 'earn' 30% returns." I clarified.

"You have this mysterious ability to tell things that are so common and simple yet have an uncommon and useful insight" said Ritesh

"So I hope that you will not leave your money idle in your bank account anymore and make it work for you by investing it" I tried to reconfirm

"Yes, I will. But... Hey, wait a minute, don't I have time till March 2010 to make my tax saving investments?" asked Ritesh, switching back to his mode of procrastination.

Another battle to fight to win procrastination - I thought and just smiled.

What would you do if you were in a situation similar to Ritesh - i.e. you have spare money to invest and are eligible for tax saving benefits, will you still wait till March or start investing systematically much early? Do you understand and agree with the principle of 'rupee saved = rupee earned'? Which according to you is the best investment avenue for saving tax under Section 80 C?