I speak for 2-4 hours on retirement, and I can tell you it is difficult to speak for 3 hours on retirement planning, because it is a simple topic and does not take so much time. Please understand being simple means – simple to understand. Not saying it is easy to do.

So Retirement Planning 101, let us say consists of the following things:

1. Knowing when you will retire.

2. Knowing how long you and your spouse will live.

3. Knowing how much you will spend in this period

4. Knowing how much your medical expenses will be.

5. Starting to save/ invest as soon as possible  (understanding, and so tapping Compounding)

6. Investing as much as possible, as quickly as possible, and not interrupting the compounding.

7. Understanding asset classes – equity, debt, cash and real estate

8. Understanding asset class returns, standard deviation, mean, and reversion to the mean.

9. Understanding Asset Allocation.

10. Knowing that Cost really matters, and one way of mitigating costs is through higher saving.

 

I hope that you realise that 1-4 is a joke – nobody can estimate these 4..so what you have to do is from 5 to 10 !!

Start of with a prayer on your lips, a white board, a nice calculator, and an adviser. Chances are in about 5 years you would have learnt why you do not need an adviser. If the adviser is good he would have delivered good results by now and you would do away with the doubt of whether you need an adviser.

So retirement which is the biggest asset that you will buy starts of by doing a SIP in a few mutual funds. I would suggest a combination of a large cap fund (for e.g. Franklin India Blue Chip fund or Icici Prudential Focused Blue Chip fund), one mid cap fund (Hdfc Midcap Opportunities fund?) and a balanced fund like Hdfc balanced fund.

How much should you save/ invest? The answer is simple – it does not matter. If the retirement calculator says you have to invest Rs. 32000/- and you are able to invest only Rs. 10,000, it does not matter. MAKE A START. That is important. Once you start and after a couple of years you make it 20,000 and then increase it to Rs. 45,000 you would have at least partly compensated for the delay.

You must not buy any plan from a life insurance company – forget what it is called!! Whether it is called ‘Endowment’ or ‘Moneyback’ or ‘Unit linked’ or it has the word Retirement or Pension…IGNORE products from a life insurance company.

The mutual funds also have retirement plans on offer, but no adviser sells it, so there is very little chance of it being offered to you. If you are a PPF fan continue your PPF, but a big portion should go into an ELSS – clearly have a vision that you will touch that ELSS only when you retire.

So discontinue your endowment plans, keep your PPF alive, keep your EPF from your company alive, start doing a couple of SIPs..and hey your retirement will be fine. Rather you will be on the right path!!

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  1. sir thank you very much for putting this at right time

    i want to put 30 lakhs conserve this capital and get me monthly interest that i can use for my house expense.

    can you suggest best plan apart from FD

  2. Sir,
    I am not sure why you are against a coverage from a Life Insurer. If the investor does not have adequate corpus then he/she definitely requires a hedging mechanism in terms of a term insurance so that in case of eventuality the investor’s spouse’s interest is safeguarded. I am not for a Endowment or ULIP but a Term Insurance is definitely recommended

  3. this post for retirement planning , and just mentioned the pension plans offered by life insurance and not against term insurance for life risk cover.

  4. Simple things are very difficult to follow,Most of the people want complex solutions like trading in penny stocks, real estate joint venture etc etc for reirement

  5. Sir,

    Please do not hesitate to repeat this post as new readers are coming to this blog regularly and they may miss this..

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