When a 25 year old earns Rs. 500,000 gross, and has read ‘Retire Rich Invest Rs. 40 a day’ you think there is some chance that she will save for retirement.

Or at least save something, for some event, right?

Wrong. ‘Subra Retirement is for my Dad, I need to live it up’.

Here is a generation that is brought up by seemingly prosperous parents (who keep saying they are smart because their property appreciated!!) in a land of IM, I Phone, I Pad and Now Enjoy.

So the 5L ctc is converted quickly into parties, dresses, jewels, 4 wheels, ….and about 40k lying in the bank. Of course they pay no rent, no money for food, sometimes not even for eating out,….so the lifestyle expenses is ALL that they can manage in their ‘great ctc’. I also know of a 25 year old whose ONLY contribution to the house is filling up petrol in his mother’s car. He is good enough to drop his mother in her office – so that he gets to use the car for the rest of the day. Mom hikes a ride from a colleague in the evening.

Some of them have educational loans, vehicle loans, marriage loans and a social pressure to get to a Mortgage. Hmmmm what will these kids do? Or rather what should they do?

1. Get on a budget: even knowing on what they are spending how much is a great first step. So even if not a budget, just keeping an account of what and where and how much of the money going is a very IMPORTANT first step.

2. Start a SIP: At Rs. 500,000 salary, there is surely some tax to worry about so getting into a SIP in an ELSS makes sense. Do not worry about what happens when the DTC comes into force…etc. just start. A good big ELSS in a growth option.

3. Keep some money in a Money Market liquid fund, for emergencies. If it is kept in the SB account or a bank FD, the ease of breaking it is too tempting.

4. Take term insurance (especially if your parents are not so well off, and you think that at some stage later on they will depend on you), at least cover all your loans, and make sure your parents get say Rs. 25 Lakhs. If you are in a relationship…make sure that you talk money with him/ her too. It is as important as the other taboo topic!


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  1. What I follow

    Make sure you “vanish” 50% of your CTC once you receive it! It is very simple – just do a RD/SIP/Sweep in FD. Make this a habit from start so that you wont get addicted to that pay check and CTC. You can always live with half your salary.

    Liquid funds are now truly liquid. Easier now with internet and fundsindia. Reliance even provides a debit card for withdrawal.

  2. I’ve already commented elsewhere on this site that retirement will not be an option for the current working generation that is in its late 20s to late 30s. Retirement (whether forced/voluntary) will mean emotional loneliness, mental atrophy, and more likely than not, economic destitution.
    All these advances in medical technology must amount to something! In addition to increasing your lifespan, it will also increase your productive span! So DO NOT grumble and take it happily. Forget about sitting at home listening to bhajans and going on afternoon walks when you hit 58.

  3. Subra Sir,

    I think the Huge number which is projected by the experts is what puts off people (everybody needs a few crores it seems).

  4. Subra Sir
    You are doing a great service. Sooner or later this generation shall also come to its senses.

    Please let me know how can I seek your guidance about investments through email. Presently, I m going through ’40 ruppes a day’.

    Jai Parkash Sharma

  5. Siddhant

    the people’s inability to see tomorrow is a BIG problem. The earlier gen had 3-4 kids (I mean people born in the 1920s, 30s, 40s) however people born in the 1950s and onwards have 1 or 2 kids. Old age will hurt them real bad. If they run out of money, and are hit by boredom – believe me they are doomed. India will soon hit a growth plateau – remember we are a YOUNG country in 2012. In 2042 we will be an overcrowded country with a huge competition. If you do not have a few crores, God help you.

  6. A research in china found how young 25 year old’s were able to support a extravagant lif e style that included Loius vitto hand bags , champagne etc and concluded that it was not the young person’s income but 4 grand parents supporting one grand child!

  7. Siddhant,
    I went through similar disbelief a few years ago. Then I used my excel skills to create a simple worksheet. As I am nearing the retirement age, it helps project more correctly what will be your running cost after retirement.
    The net funds you require as savings after retirement is indeed in crores of rupees. Just do the math and take all factors into consideration.
    Present monthly expenses
    Annual savings till retirement
    Present savings value
    Expected returns on savings till retirement
    Expected return on savings after retirement
    % of present income you will need after retirement. (This will rise not reduce after retirement, due to extra travel / medical)
    Any extraordinary expenses left over – Children’s marriage / house etc
    Loans to be repaid before retirement
    Expected Income tax rate
    etc etc.
    The calculations showed that you are safe only if you can get returns that are higher than inflation even after retirement. This means having equity exposure till you die.
    Being scared of the figure will not help. The earlier you start, ther better prepered you will be.
    Life expectancy is rising in India too due to better medical care / awareness about health issues . This adds to the problems. Ladies outlive their husbands very often. One has to take care that your partner understands the planning and supports the same.

  8. Hello Rajeev sir,

    While I do not disagree with you at all I am just saying that a normal non finance person gets overawed by the crore figures & stops doing anything because he feels it is impossible.The other side of the OUR Profit & loss statement is the income side which is going to increase significantly..

    then is it not fare to assume that the calculation should be done with only moderate inflation effect & not 5 to 8 % range used. because I don’t think the salary increase will lag significantly to inflation increase

    what has been your experience….

  9. I am a 25 year old guy earning over 5L CTC so will comment on this.

    1. I am managing to loosely track my expenses and general monthly budget requirement thanks to the smartphone and good expense management software.

    2. SIP in ELSS + few opend ended MFs is going on in 3 funds which comes to about 60% of my monthly take-home salary.

    3. Started putting money in liquid funds recently when I realized I needed some cash and had to dig into my MFs.

    4. I have not bought any term insurance yet. I had almost gone into buying the ICICI Iterm online policy at age of 23 but decided to drop it. Don’t have any serious dependencies on me right now. I have thought of buying it at the time of marriage. Is it ok?

    Apart from this, dad has taken a joint home loan (with me as primary) even though I insisted on taking it. The EMI’s haven’t started yet but it’s not long before that happens. Dreading the time when EMI’s will start (over 50% of my salary) as ELSS / MFs investment would become difficult 🙁

  10. Siddhant,

    I am a normal Indian middle class person, who did not care about the retirement savings till my mid carrier. The normal mistakes of investing only in debt (PF+PPF).

    Little regular investment in stocks helped a lot. Remember, at the top of Harshad Mehta scam, the index was at 800. I have invested in mutual funds via SIP for years.

    As regards your point of salaries matching inflation, you are corret. But do not forget that your expenses keep pace with your earnings. You get used to spend more money.
    Subra has correctly stated that you require crores to retire in comfort. The earlier you start the better prepared you will be.

  11. Salary will not lag inflation by much, ASSUMING the skills that you have will be useful for the next 30 years ADJUSTED to inflation. Skills sets required will change. If you are a CA..and are lucky to join a fast growing company, fine. However when you are 45, they may decide that you are just not good enough to be the CFO of a multi billion dollar company. So out you go. So even if you are qualified well (by todays standards) you may be found inadequate as requirements change. You could get downsized…SO SALARY MAY NOT BE INFLATION ADJUSTING FOR 30 YEARS. MYths need to be broken. Fast.

    Abhinav YOU NEED A COVER IMMEDIATELY FOR THE FULL AMOUNT OF THE LOAN. If your father could have afforded it, he would not have bought the property jointly, HE would have bought it ALONE…..so if u die, who will repay the loan, so taking Term insurance makes sense…

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