It is easy for some of us to write an article saying ’10 questions for which you do not have an answer’ – what such an article does is it creates panic.
Let us say your wife reads an article saying ’10 retirement Qs which you do not understand’…these are actually leads to push / rush you to a Financial Planner. The big, terrible, horribly wrong assumption is that the Financial Planner has an answer. So here are the questions for which MOST financial planners, or bloggers (including yours truly of course) do not have an answer. The persons who have an answer to these questions are busy doing something else. They are not financial planners – certified or otherwise.
What are these questions?
1. How much to save for Retirement: There are a million calculators on the web (Google will help). If you are too lazy to search, and you are India centric go to www.freefincal.com – by Pattu. You could also look at Franklin Templeton India’s retirement calculator.
2. Having no clue how much you will spend on retirement: Again the calculators might help…
3. Knowing how long you will live: Even Pattu has not developed a calculator for this. You can use this method – look at the age of all your ancestors for 2-3 generations on your parents side. Take an average (ignore accidental deaths obviously). Add about 10 years to that. Is that accurate? No. However it is better than thinking ‘my father lived till 74, so I will live till 74’ as many people tell me. Adding 10 is a necessity because over the past 100 years we have captured too many diseases.
4. Which Pension Plan to buy: Sadly there is no single answer to this complicated question. You need to create a ‘Pension hamper’ and not just buy one plan and ‘hope’ that all your pension requirements will be met by that plan. Also most of the plans are excessively debt oriented, and hence completely useless unless you are about 45 years of age. If you are 24 and looking for a retirement plan (hey retirement is a sum of money, not an age) there is no plan that you can touch. The plans from the insurance companies are the worst of course.
5. Trying to estimate the cost of Medical expenses while at retirement. Again an impossible task. I know of a 82 year old who spends about Rs. 3000 A YEAR ON MEDICATION and a 64 year old who spends about Rs. 4500 a MONTH on medication. Again a game of chance, luck, genes, habits, – and in a country where there is no long term care insurance. We are not even talking about adult diapers, nursing care, etc.
6. Creating a diversified portfolio and constantly reallocating of assets: Seriously a very important question, but sadly many planners may not be able to help you in the reallocation strategies. You need to learn it YOURSELF and implement it.
7. Reacting wrongly to market fluctuations: If you are 54 years of age and need the money when you are 65 years of age, why should you worry about 16th May 2014? How does it matter whether Ra Ga, Arvind Kejriwal, Shah Rukh Khan or Narendra Modi becomes the Prime Minister? Your portfolio needs NO REACTION to the market – surely not on a weekly, monthly or worse on a daily basis.
8. Not having a clue about the costs of buying, selling, and holding the portfolio.
I am sure there are many more such questions, but I am not sure that there are ENOUGH people WITHOUT conflict of interest, and COMPETENCE to answer all these questions for YOU.
GO AND SEEK THE ANSWERS. Now. Yup, now.
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