Want to Retire Rich or with Regrets?
BLURB: Retirement planning has been one of the most ignored life goals for the Indians which could haunt us the most in 2050. Know why
India is a young nation enjoying the favourable demographics that would have around 64% of its youth population in the working age group by year 2020. On the flip side, in 2050, India would see most of these young populations retiring or would be on the verge of retiring. India might witness a big socio-economic problem at hand if not planned appropriately. As per a report published in leading newspaper, almost 61% of India’s elderly population will have no income security by 2050. While a World Economic Forum study suggests that India will be home to one of the largest populations of retirees in the world by year 2050 & there will be an $85 trillion gap in retirement savings.
Scary isn’t it? Ask a youth who has just finished education and living up with the perks of his job about planning for their retirement? Well the most probable answer shall be it is far away. What’s more is even it the nation level, we have just started taking retirement a bit seriously with various retirement products getting launched. However, retirement is one distant financial goal that is largely overlooked by most of us and most of us do not know the cost of delay which could be devastating!
Let’s consider an example.
At the age of 25, Vishal started working with an MNC and soon began investing Rs. 1,000 per month for his retirement. He was smart enough to know the power of compounding so early in his life and thus he increased his investment amount by 10% annually as his salary increased gradually. On the other hand, his childhood friend, Sandeep being a lazy chap always delayed taking any investment decisions and ignored the impact of such procrastination on his life. He began investing at age 40 with investment of Rs. 3,000 monthly and increased his investment by 15% annually.
If we assume that both had earned 14% returns annually till they both turned 60, let us see how their investments would have grown:
In 35 years, Vishal would have invested Rs 32.8 lac and his investment would have been worth massive Rs. 2.26 crore. While Sandeep, in 20 years would have invested Rs 37.4 lac and his investment would have grown to Rs. 1.02 crore.
Surprised? Know how Vishal was able to garner bigger corpus despite investing lesser amount:
He started early which let the power of compounding play and also he was able to fulfil his life goal with lower amount.
Stayed Invested for long term which helped him to create wealth in the long-term.
- Planned for retirement as a key goal in mind to maintain his lifestyle and live his dreams post retirement.
So it’s now on you to decide whether you wish to retire rich and enjoy your second innings of the life peacefully or want to live with regrets!
Better to plan the way Vishal did, earlier you start, the better!
Here’s how you can plan for your Retirement:
Decide how much Corpus you’ll need to meet your expenses
Ascertain the following your monthly spends on basic needs, maintaining lifestyle, managing liabilities, healthcare, meeting other life goals, managing dependents, etc. Once you know your monthly expenditure value, decide when you want to retire and for how long you might be alive.
Once you know this, consider your monthly expenses at current costs.
Point to Remember:
Inflation can increase Lifestyle & medical cost post retirement.
Better living conditions & innovation in medicine science can help you live longer.
Decide how much to Invest to meet those expenses
Do not stop the investments during volatile time as doing so shall negatively impact one's financial planning in the long run.
Select a suitable asset allocation and Diversify your investment across asset class to reduce investment risk.
You are now ready to invest!
If you have already started investing for your retirement, revisit your retirement plan to check whether you are on the right track. And if you haven't, let’s plan now, so that India - Retires Rich!