A lot of qualified planners have given the following advice to a few people who have written in to me..let me summarize a few of them for you:
1. Equity is risky, it has no place in your portfolio. I write so much about equity, I am sure my readers know how stupid this line is. Do I need to elaborate? Just read my blog..and you will know about the risk of inflation.
2. Equity returns are not guaranteed, so it is risky: This is perhaps worse than the first point, so I will ignore this too. Just a little tear for the client and his planner.
3. Buy a big house and you can sell it and use it as a retirement kitty: You need to be extremely lucky to get good returns on a single property portfolio. Almost impossible. If at the time of your retirement the only asset you have is a piece of real estate in which you are living, man you should sack and sue your advisor. Or shoot yourself for listening to such bad advice.
4. You will be able to withdraw 9% from your portfolio (planner’s logic – senior citizen’s account pays that much, dude): Complete bull. You should be lucky if you can withdraw 4% of your portfolio if it has a healthy mix of equity and debt – and this amount may be completely insufficient by the time you are 70. Inflation adjusted withdrawal, post tax making a 9% assumption is a financial crime. Shoot your planner, guns are available.
5. At retirement all your money should be in debt instruments: OMG I have heard this too many times. Even after you retire you will have to battle with inflation. Not more than 50% of your LIQUID net-worth should be in debt oriented instruments. At the age of 80 you may be able to move to 90% in debt, not earlier…and if you have a younger spouse – at her age of 80.
6. You can start saving for retirement after you have accumulated money for your daughter’s marriage: I seriously debated whether you should shoot, poison or throw your planner in front of Shathabdhi for such advice. I would do all 3. The worst thing you can do is delay the start of investing for retirement. One girl I know has started at the age of 24years – she is now 32 and is going strong with her SIP in equity funds. Please remember the title of my book ‘Retire Rich: Invest Rs. 40 a day’ – this is true only for 24 year olds doing a SIP in an equity fund and increasing it by 10% every year. Time is your best friend when you are young. If you do not start young it becomes your enemy soon. At age 40 you will need to do a SIP of about 55,000 per month if you did not do 40 at age 24.
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