Comments on: Retirement? That’s for my Dad!

By: subra

subra — Thu, 27 Sep 2012 17:15:48 +0000

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…

By: Rajeev

Rajeev — Thu, 27 Sep 2012 16:02:54 +0000

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.

By: Abhinav Sonkar

Abhinav Sonkar — Thu, 27 Sep 2012 07:33:02 +0000

Correction:
“…I insisted on NOT taking it”

By: Abhinav Sonkar

Abhinav Sonkar — Thu, 27 Sep 2012 07:30:58 +0000

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

By: Siddhant

Siddhant — Thu, 27 Sep 2012 03:34:20 +0000

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….

By: Rajeev

Rajeev — Wed, 26 Sep 2012 05:24:25 +0000

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
Inflation
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.

By: Vani

Vani — Tue, 25 Sep 2012 13:52:39 +0000

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!

By: subra

subra — Tue, 25 Sep 2012 11:50:47 +0000

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.

By: Jai Parkash Sharma

Jai Parkash Sharma — Tue, 25 Sep 2012 08:57:53 +0000

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

By: Siddhant

Siddhant — Tue, 25 Sep 2012 07:06:35 +0000

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).