Yes Subra, I agree with you I need X amount for retirement, after all you may end up spending a fortune on medical expenses during retirement

——-Most people tell me this.

Wrong. You may or may not spend much on medical expenses (hey I am not saying you do not need medical insurance). I am just saying that medical expenses may or may not happen, may happen once in 4-5 years. The biggest expenditure in retirement is still likely to be INCOME TAX.

Many people plan their accumulation phase well – and they do accumulate decently. However on retirement they find that rent, pension annuities, interest from banks, etc all add up to a decent number, and they continue to pay tax at 30% . THUS the single biggest expenditure on retirement continues to be personal income tax.

Myth 2: Medical Insurance will cover everything!

I have no love for the people who do not have medical insurance, however I cannot look at you in the eye and say that all your expenses will SURELY be covered by the claim. The industry is notorious for delaying and denying claims. So be prepared to pay for illnesses which ONLY the insurance company ‘knows’ is pre-existing. In the medical insurance business we are in the 1950s. Competition is only in MARKETING, not in service. Sad but true.

Myth 3: You will downsize your standard of living: This was true for people who retired in the 1980s. However, now it is not true at all. Most people who are retiring now, continue to draw from the corpus as though nothing has happened. The car is still a SUV, the holidays are luxurious, and generally nobody gets a feeling that they are looking at a retiree. So come to grips with the fact that you will not or cannot downsize, so do not expect any reduction in the day to day living expenses.

Myth 4: You must have life insurance if you have a loan

For many people the brilliant myth of the life insurance industry stays stuck. If you have 3 houses – out of which one is on an EMI, there is no need to have life insurance. Nor do you have to repay the home loan just because you have retired. If your home loan is at 7.5% p.a. you are better off funding your PPF and wife’s PPF accounts – afte all 8.5% is better than repaying the cheap loan. So all loans should be repaid on retirement, and you need life insurance if you have a loan are mythical.

Myth 5: Rs. ONE CRORE is sufficient for retirement:

Not true at all today. Will sound like a cruel joke 5 years from now. You need at least 1 Million US $  to retire – assuming that the primary residence and such basic needs are already taken care of.