Monthly expenses in the 2nd
year after retirement: It rises again, to about
₹1,28,000. Your bills keep climbing even after your income has stopped.
Corpus you need to retire: Your answer. It covers every rising
year till your life expectancy. Take 90, not 75. None of us knows the date, but
our money should reach it.
Change your retirement age from 60 to 65
and watch the number grows. But it may be achievable with an extra 5 years of
working and reduction in 5 non-working years. This’ll work only if your career
allows it.
Next, look at your monthly expenses. You
may reduce your unnecessary expenses, though it’s tougher than saying. But DIGNITY
is not negotiable. Do this only where your career and health allow and never
plan a retirement full of compromises. Your confidence and dignity forever are
a must.
Prioritize your goals, you have limited
funds for your retirement, you may cut the budget of other goals and fund for
your retirement. This can be really helpful with financial planning. Financial
planning will take care of all your goals; you can prioritize and replan things
as per your savings.
Retirement planning is a priority not a
casual exercise. Don’t wait for someone to say everything is ok. Most of the
advisors do it. You need a very good fee-based advisor who can plan retirement.
Ask him your plan for 30-35 years of non-working life.
Real retirement advisors are very few in
India, and they charge ₹1 lakh to ₹3 lakh a year. Everyone else is selling some
product.
Don’t ask banks or agents as they will
try to sell a new plan as remedy.
You need a plan for better retirement
and sufficient pension forever. Buying pension plan or SWP is just a casual
approach. Can you take risk of unplanned retirement for 30 to 40 years, where
money is the only thing, you can depend on?
3. Learn retirement planning yourself
Only you want your life after 60 to be
good. Once you know all the strategies of planning retirement income and how
retirement income is built, you can retire with lesser savings too.
Plan an early retirement with lifelong
passive income just like rich people do. Save the commissions that quietly eat
close to 40% of your wealth by 60. You can plan your retirement without sharing
your data with anyone. Thousands of people have liked the course Planyourworld
Wealthy IQ on retirement planning. It’s easy to understand,
has many strategies on planning retirement. It shows the path to financially
free retirement even if it looks difficult today.
(Inflation 7%, return after
retirement 8%, life expectancy 90 in all three.)
Rajesh is 40 and retires at 60. His
house runs on ₹50,000 a month. At 60 the same house needs about ₹1,93,000 a
month, so his target is ₹6.11 crore. He was carrying “two crores” in his
mind. The gap is big, but he has 20 years, and that is a real advantage.
Ramesh is 46, retiring at 60, spending
₹70,000 a month today. His first-year expense will be near ₹1,80,000 a month,
and he needs ₹5.70 crore. Notice this. He spends more than Rajesh today,
yet needs less. Inflation got only 14 years to work on him, not 20.
Anil is 50, retiring at 60, spending ₹1
lakh a month. At 60 that becomes about ₹1,97,000 a month, and his target is ₹6.21
crore. Only 10 years to build it. This is the age at which most people
finally get serious, and also the age at which it gets hardest.
|
Person
|
Age today
|
Expense today
|
Expense at 60
|
Corpus needed
|
|
Rajesh
|
40
|
₹50,000
|
About ₹1,93,000
|
About ₹6.11 crore
|
|
Ramesh
|
46
|
₹70,000
|
About ₹1,80,000
|
About ₹5.70 crore
|
|
Anil
|
50
|
₹1,00,000
|
About ₹1,97,000
|
About ₹6.21 crore
|
1.
They
pick a round number. One crore sounds big, so it feels safe.
2.
They
freeze today’s expenses, forgetting what their house ran on 20 years ago, and
that the same jump will happen again.
3.
They
buy a plan instead of building an income. A maturity value at 60 is not a
monthly income till 90.
4.
They
start late, and they trust returns they will never earn. Enter 12% and you get
a comfortable answer with an uncomfortable retirement.
Start with the number from
this calculator, then work backwards.
Particularly under 40 things
are under control, but if you’re above 40 it’s high time for you to take
action.
Add up all you already hold
for retirement. PF, PPF, NPS, mutual funds, deposits, gold. That is your base.
Find the gap between the
amount required and the corpus you can accumulate. Fix a monthly investment
from your monthly savings for it and raise that amount every year with your
increment. Keep long term money in growth assets while you earn, and move it to
safety as 60 comes closer. Review once a year. Twenty minutes a year protects
thirty years of your life.
The best way is to do proper
financial planning as it covers all the priorities of your life. It shows your
own strategy, considering your career plan, current and future savings, goals
for children, current investments, health, your preferences, where will you
live, and other important factors.
You have 2 options, hire an advisor and let him guess about your life, wait for
2 months for your final plan. Or you can do it on your own, simply learn, plan
and start working on your plan in 15 days.
1. It counts rising costs up to
the age of 90, not today’s expenses frozen till 90.
2. It gives one clear target
amount to retire, not a sales pitch.
3. It separates return from
inflation, so you see the real strength of your money.
4. It works for any retirement
age, so you can compare 55 and 60 in seconds.
It has been built by
practicing financial planners, from real cases of real families.
In more than 20 years of this
work, I have seen people reach 58 and then realize their money will not go the
distance. So, the logic was kept plain. Grow the expense, fund every year till
life expectancy, earn on the balance. Nothing was assumed to make the answer
look pretty.
2.
Salaried
people whose company may retire them earlier than planned.
3.
People
with money spread across PF, FD, mutual funds and insurance, but no clarity on
the total.
4.
Anyone
told that one plan will take care of retirement.
Viplav Majumdar is a
Certified Financial Planner and founder of Planyourworld Training Academy. For
over two decades he has helped families plan retirement. He now teaches
ordinary savers to manage their own money, so they never depend on a salesman
for their future.
Nothing complicated.
•
Monthly
expense on your retirement day
Future expense = Present
expense × (1 + inflation) ^ years left to retire
•
Real
return after retirement
Real return = [(1 + return) ÷
(1 + inflation)] − 1
•
Corpus
needed on the day you retire
Corpus = First year annual
expense × [1 − (1 + real return) ^ (−n)] ÷ real return × (1 + real return),
where n = life expectancy − retirement age
•
Expense
for the next year
Next year expense = Previous
year expense × (1 + inflation)
Your savings are limited.
Your responsibilities are not. So, handling your own money is not a luxury, it
is protection.
If the number on your screen
shook you a little, use that feeling. Learn how retirement income is built and
how to check every plan you own. Planyourworld Wealthy IQ was made
exactly for this, for people with no background in finance.
Share this calculator with
the people you care for. Nowhere in the world is there a plan that hands you a
ready retirement income. You have to build your own.