The 9 points to consider while planning for retirement

Retirement is no more a word which means life after 60. The kind of work load that is put on our heads, everybody wants to retire earlier. The question is how many Indians you have seen who retire wealthy and are able to maintain the same lifestyle? At the same time how many foreigners have you seen travelling, who are above 60? Let’s try and see some of the points that may help us plan a better retirement.

  1. Retirement is for everybody, whether it be a salaried, self employed, businessman, or any other occupation. Today even if you are a businessman there is no surety that your next generation wants to join you, therefore you need to leave your business and make sure the income continues.
  1. Retirement in technical terms is known as point of inflection or when your unearned income becomes more than your earned income. For e.g. if you last drawn salary is 2 Lakhs per month and you also have a corpus which at 6% can give you 2 Lakhs per month, you can retire and pursue your passion. You do not need to work for basic survival after this.
  1. Most people start planning for retirement at the end, but that’s too late my friend. Retirement planning should ideally begin with your first earnings. A person who starts planning at 25 can retire at 50.
  1. Don’t be a single asset class player. Most of the people in India become compulsive asset class investors. For e.g. a person who loves real estate will keep on investing in real estate and someone who has more liking for equity will continue to invest there no matter what happens. One needs to avoid such impulsive behavior and concentrate on portfolio returns. If one asset is not looking convincing, then there is no point sticking to it.
  1. Don’t underestimate interest rates and inflation. People, who are around 45-50, believe that with their corpus, they will make a FD at 8-9% with which they can manage their monthly income forever. They also believe that the inflation will keep falling in India. Now the above two thoughts are contrarian to each other and one needs to do realistic calculations.
  1. Find a sound advisor who can help you lay down goals according to priority and then help you make a road map to achieve these goals. Lay emphasis on retirement. Now let’s not even discuss the fee that the advisor should be charging for his services. In the past not paying has proven more dangerous than paying to a genuine advisor.
  1. Just imagine three phases of life:
  • Accumulation Stage: When you are earning you should be able to save higher and people just go opposite.
  • Vesting stage: When you are nearing the age you have decided for retirement, be sure you reduce volatility in your portfolio. This is also the time to decide the amount you require per month and also a resultant of how much corpus have you finally accumulated.
  • Reaping stage: Since now you have started getting the monthly income keep an eye on interest rates. Any fresh income that you earn from your occupation now should help you prolong your retirement income or increase the monthly outflow.
  1. Ignore peers and concentrate on your court. Sometimes we tend to get carried away by financial decisions our friends have taken for their retirement and on the face of it might look great, but you need to examine the risks closely. Sometimes you can make an irreversible mistake which can prove disastrous.
  1. If retirement doesn’t sound that interesting, ask your spouse about how she wants to lead her life post 55, give a thought to her desires as well and just filter these desires by what you have so far achieved….you could be shocked.

Just plan in time for the wonderful years when your responsibilities are over, you can catch up and holiday with old friends, relatives and people whom you just missed being in touch while you were busy grinding in career. Just imagine your passion….is it travelling or photography or that painting you wanted to paint but couldn’t get time to. Retirement is all about planning and age is all about mindset….don’t mix them.

All the best!

Anil Budhraja