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There comes a wonderful milestone in everyone’s life called retirement. Some people feel this is the end of the cycle but many with planned retirement believe this is the beginning of happy and good times of life. Retirement provides fantastic opportunities to return to the hobbies you rarely could spare time during your working years of life. Do you remember the retirement speech of the legendary cricketer Sachin Tendulkar? It was not a sudden call, it was a very well thought and beautifully planned event that was executed with complete perfection, everyone had tears in their eyes, his family was around, his best friends were there on the ground during that farewell speech of Sachin. Special arrangements were made to bring his mother (who is confined to a wheel chair) to the ground. His coach, who taught him play cricket from a very young age was there as well. It was an occasion worth celebration and he did it with complete passion and style. Whichever walk of life you come from, everyone has a Sachin Tendulkar inside him. Like him, you have worked very hard for your country, family, company, department or business. You definitely deserve a grand farewell, why not? You so well deserve this and should reward yourself in style.
Actually, in India 95% of working professionals, service class, businessmen or others in any earning field are not able to plan their retirement in the way it should be planed. Planning retirement is itself an art of life but many people fail to learn this art. Few dates that are important for you in life are your date of birth, your date of first job, your date of marriage and your date of retirement. We normally live for others but if you ask me these four dates call for grand celebration, three of these dates are close to your heart but the fourth one is ignored badly. The decision to decide this grand farewell for yourself firmly lies in your own hands and no one has any control on this except you and only you.
So, any age you are today, take a cup of coffee or for that matter fill a drink of your choice and give yourself 60 minutes to plan out when you really want to retire, at sixty, fifty five, fifty or even before fifty. Your present circumstances, financial status or achievements till now have not much to do with your retirement. if you are between twenty-six to forty years of age, there is sufficient time to plan your retirement. Once you have decided the age you want to retire, decide any auspicious day (in case you are not in a Govt job where retirement date is pre fixed). You don’t have to go to anyone to ask for this date, take your call to fix a date of your choice and document it for sure. Once this exercise is done, your goal is fixed like Scahin Tendulkar who knew that 200th test was going to be his last one.
By the way why it is important to retire? Imagine a situation, if Sachin Tendulkar was still playing cricket in all three formats of the game. How you would have felt as a hardcore cricket fan, you would have yourself started criticizing his decision of playing too long, his energy level would have come down drastically and his natural game style would have shown impact of his age. He would have committed some critical mistakes at an important game and you would have lost all respect for him. They say every good journey must come to an end and this should come to a good end. Life cycle let’s believe is 75 years, will you continue working till the last day? Won’t you ever enjoy your success? Won’t you ever live your hobbies? Won’t you ever let the money making exercise take the back seat? Won’t you ever enjoy the game of golf? won’t you ever pack your bags for the char dham yatra? won’t you ever see the 400 tourist places that exist across India? Won’t you ever set yourself on journey to visit the seven wonder’s of the world? (we have only one in India), Won’t you ever indulge into charity? won’t you relieve yourself from filing GST returns? If the answer is no then wish you good luck and a bank full of money. But, living is all about enjoying the golden period of your life, when you have a house of your own, settled children, good flow of income and your list ready for travel, hobbies, enjoyment, meeting friends and doing what you ever wanted to do but could not do, because of time constraints… that means time has come to halt and it is time to look at life differently, its time to Retire. All you need is plan it well.
Have a look at sun, you will realize that while earth is always on the move, a sunset here in India is sunrise in USA but it does not lower the speed of earth’s movements. Now compare your life with the earth, your life continues to move as well, a sunset of your working life is actually the sunrise of a different world altogether for you. That’s why people call retirement a golden age and one should be well prepared for the golden age.
Why is it important to decide a date, why not any day? You can compare this with your marriage date, things only started moving when the date got fixed. Before the date is fixed, everything is on a very casual mode and the progress of planning is quite slow. But once the date is decided, you start fixing the responsibilities, list of invitees is finalized, dress designers are approached, catering teams are contacted, the photographer is booked, the band party is given an advance, necessary home furnishing starts on war footing and everyone gets involved in a way to complete every task well before the fixed date. There is passion, planning and enthusiasm, if someone asks anyone in the family about the occasion, everyone tells the same date. Just like marriage date, retirement date also needs to be fixed and its announcement be made to public. Let me tell you your own productivity will be at a different scale and platform to be in hurry to reach this date.
People with well thought out retirement planning, earn great respect in the society, your life has moved from being a college boy to a matured man, but no one noticed the journey. Its only at the time of retirement that people take note of your achievements like what kind of house you have built, how well settled are your children, how good a social circle you have created, and so on. As a popular life insurance company, tag line say “Life Goals Done”…it’s time to say goodbye to working life. If you are running your business, have a shop, factory or showroom, it’s time to pass on the baton to your children at the right age. They will definitely bring new energy, new ideas and new momentum to business, that you will certainly feel proud of your decision at some point of time. This creates a win-win situation in the family, where you enjoy, and your children also find freedom. Retirement does not mean that you can’t give expert advice, given your experience your opinion will always matter.
While you decide and fix a date to retire, it’s equally important to understand your financial needs post retirement and the kind of fund you will be required to create for post retirement life. Here you need expert advice to plan your financial future post retirement. You should ensure that you don’t mis-calculate any expense that you are supposed to meet after retirement. While twenty six years to fourty years is a good age to start working on your retirement plan. But even forty years is not bad for such planning. Anything post forty will be little late.
Above image is good enough an indicator to understand that before sixty years, you might have three situations where you earn, you spend, you save but after retirement you will just have one situation i.e Spend, Spend and Spend. So, it becomes altogether more important to understand that unless there is solid provision of funds flow post retirement, your plan to retire won’t ever work.
The biggest question many of the retirees and those approaching retirement struggle to answer is, how will they cover expanses post retirement with decreased income, or in some cases no income at all, will you eat away your savings, sell assets or end up taking another employment to keep your house going. These all are very scary questions, only solution is plan well in time and save enough.
While you get retired, you will find yourself in either of these three situations.
Situation 1 – You retire from a government job with good fund in hand but pension is not enough to meet your household / lifestyle expenses. In such a scenario, you need to invest fund in hand in a way that you start getting monthly amount through SWP process.
Situation 2 – You don’t have a pensionable job but still you will have expenses to manage, in such scenario what you need to do is start saving (between twenty-six and forty years of age) and invest in mutual fund through a SIP to build a retirement fund over a period of twenty to twenty-five years. Invest maturity amount at the time of retirement into SWP to get monthly transfers into your account every month like you get pension.
Situation 3 – You are a professional or a business man and have not created any pension fund at all. You need to shift money lying in your FD accounts or PPF maturity to a Mutual Fund (Lump sum) and start with SWP process to receive monthly flow of income or start a SIP at an early age with expert advice once you understand what sort of monthly amount you will need post retirement.
How big should be your retirement fund? Suppose you have a pensionable job
| Expanses | Year 2020 | Likely Exp in 2045 | Pension from Existing Job | Additional Pension Required | Retirement Fund Required |
| Monthly Exp | Rs. 40,000 | 1,60,000 | 80,000 | 80,000 | 1,20,00,000 |
| Monthly Exp | Rs. 60,000 | 2,40,000 | 1,20,000 | 1,20,000 | 1,80,00,000 |
| Monthly Exp | Rs. 75,000 | 3,00,000 | 1,50,000 | 1,50,000 | 2,40,00,000 |
You work in private sector & don’t have a pensionable job
| Your Age | Age of Retirement | Year to Retirement | Monthly Exp as of 2020 | Exp after 20 Years | Pension Payable in case of Govt Job | Pension Deficit / PM | Pension Fund Required |
| 35 yrs | 55 Yrs | 20 | 22,000 | 78,900 | Nil | 78,900 | 1,20,00,000 |
| 37 Yrs | 58 yrs | 21 | 40,000 | 1,52,800 | Nil | 1,52,800 | 1,80,00,000 |
| 40 Yrs | 60 Yrs | 20 | 50,000 | 1,82,000 | Nil | 1,82,200 | 2,00,00,000 |
| 30 Yrs | 55 Yrs | 25 | 70,000 | 2,62,000 | Nil | 2,62,000 | 3,50,00,000 |
The chart below is indicative of the fact how your household expanses will increase over a period of next forty years (This is 50 years Chart from 2000 – 2050). It’s always better to plan accordingly.
| Year | 2000 | 2005 | 2010 | 2015 | 2020 | 2025 | 2030 | 2035 | 2040 | 2045 | 2050 |
| Exepnses @ Rs. 10,000 | 10,000 | 14,700 | 19,400 | 25,600 | 32,700 | 41,800 | 51,900 | 63,200 | 81,900 | 1,06,400 | 1,34,700 |
| Expenses @ Rs. 20,000 | 20,000 | 29,400 | 38,800 | 51,200 | 65,400 | 83,600 | 1,03,800 | 1,26,400 | 1,63,800 | 2,12,800 | 2,69,400 |
| Expenses @ Rs. 30,000 | 30,000 | 44,100 | 58,200 | 76,800 | 98,100 | 1,25,400 | 1,55,700 | 1,89,600 | 2,45,700 | 3,19,200 | 4,04,100 |
| Expenses @ Rs. 50,000 | 50,000 | 73,500 | 97,000 | 1,28,000 | 1,63,500 | 2,09,000 | 2,59,500 | 3,16,000 | 4,09,500 | 5,32,000 | 6,73,500 |
Below chart is indicative of the fact on how to build a pension fund in the range of 40 lakh – 1.20 Crore, given the planning period between ten and thirty years at different age levels. Here we have considered earlier age of planning as twenty-five years and max age as forty-five years and retirement age as fifty-five years.
| No of Years to Retire | Monthly Exp flow required | Fund Size Required | Monthly Saving Needed |
| 30 Yrs | 1,42,600 | 1,20,00,000 | 3,400 |
| 25 Yrs | 1,21,900 | 90,00,000 | 4,700 |
| 20 Yrs | 90,800 | 60,00,000 | 6,100 |
| 15 Yrs | 68,700 | 45,00,000 | 9,100 |
| 10 Yrs | 52,500 | 40,00,000 | 17,200 |
This chart is indicative of a monthly expense of Rs. 30,000 as of date.
Following is evident from above chart
- it is never too late to indulge into Retirement Planning. Any age before 45 years is a good age to start working on your retirement fund
- Earlier you start better this would be to create a sizeable fund. If you look at the above chart, building a Fund of Rs. 1.20 Crore need Rs. 3,400/PM where as to build a fund of just 40 Lakh you need Rs. 17,200/PM
- You need to take SIP route to build your retirement fund, with discipline of investing every month, you can create a big fund of your need.
- Knowledge of inflation plays an important role in planning your retirement fund, sometime shortage of a few thousands can spoil the expense game. Keeping inflation in mind you must also adopt top up facility to balance out inflation.
My effort is to ensure that you understand the importance of creating a retirement fund, keep in mind earlier the better, Budget it in your monthly priority list, sacrifice some expense to accommodate this requirement, plan it well and make it a habit to start saving for this fund month on month without even a single month halt or break.
Start as small as you can and then keep adding 10-15% every year to your fund, this exercise will help you to build a substantial amount over a period of fifteen to twenty-five years.
Following are important points to be considered while you start a thought process for your retirement planning
- Retirement Planning is an art and you need to be expert at it
- First point to start with retirement planning is to fix a date
- Work on monthly flow of expense you need post retirement
- Take professional help to work on your retirement fund
- In retirement planning, one who starts earlier is a winner.
For more details and to get a personalized Retirement Planning Presentation, please mail us at savefirstmail@gmail.com or call me at 9501017769. Find more at myselfkamal.com
