http://blog.investraction.com/ – a website called CapitalMind …see the video understand it ….and come back here…

He has made the pension plan look bad (fair to him he has said at the end that this is just one plan which he has picked up…it is likely to be true for many other plans.

However he has been kind to Max New York Life….actually. He has missed out something which makes the plan worse.

Any reader…Ranjan Verma, Manish….anybody want to fill in the gap…?

MM is a nice mag with a brave editor …he writes about things which other editors are not too keen to write.

so read on…http://www.moneymantra.co.in/cover_story.html

it is the cover story……of course I had done an earlier cover story on inflation for those who remember…

Myth No. 1: I am too young to plan for retirement: This is a very very wrong statement. The earlier you start the sooner you reach the goal. What happens if you are not able to earn from the age of 54? You thought you will save very well in those 7 years did you not?

Myth No. 2: I can never be as good as Vallabh Bhansali or Rakesh Jhunjhunwala so why try? So stupid. Of course I cannot write as well a zillions of good to great writers, but I have been blogging, published a book…and till date nobody has called my blog lousy. So what if I cannot be as good as Vallabh in investing or Swaminathan Anklesharia Iyer in writing? Come on I can manage my own portfolio (lot of value copying from Warren and Vallabh, but my money does not know I have copied, does it?).

Myth No. 3: It is too late for me to start planning for retirement: same as point no. 1. Start today, of course yesterday would have been better. However today is still better than tomorrow.

Myth No. 4: Planning for retirement is very difficult. Not at all. Invest some time first – the rest of the pieces fall into place. Sorry to use this post as a plug – ‘Retire Rich Invest Rs. 40 a day’ is my book and a good place to start.

http://www.subramoney.com/book-written-by-me/

PS: there are only 3 myths – the 3rd one is just like point no. 1 and the 4th is a plug.

Today if you plan to live in the stupidly overpriced cities of India, you will be living in a house which is worth ‘Rs. 5 million’ at least!

So is US $ 1 Million enough to retire in the USA? I think not.

In India last week I met a senior executive of an M N C who wanted to retire. As he was just 53 years of age…and spending Rs. 70k a month, my calculator said…’Sir you will need Rs. 3.25 crores as a corpus’. Luckily he was already there…so it was not a difficult call for him or for me. Otherwise most people need a lot of drumming about why they need Rs. 3.25 crores when his father needed less than Rs. 15 lakhs – about 25 years back. L O L that is the power of compounding. Please remember that good quality independent research is NOT AVAILABLE for Indian conditions…so here is a link to good research in UK…

if you find articles in the US and UK context …and you want a short cut, just multiply (for US $ use Rs. 30 for conversion) and for the Pound use Rs. 50 ….

so if this article inspires you…you will need 600, 000 Pound i.e. Rs. 3 crore.

qed, i REST MY CASE.

http://www.telegraph.co.uk/finance/personalfinance/7635532/Couples-must-budget-600000-for-retirement.html

I find 2 things very difficult to understand. People have small salaries, they get themselves insured. Very good. However as their monthly spending increases, THEY do not increase their sum assured. Also as income increases and their consumption increases…THEY do NOT increase the amount to be set aside for Retirement either. This is stunning. In my book…I have created a table…showing how much to set aside per month…if your current expenditure is X and you are 30 you need to save say 1X…but if you start at 45 it may have become 2X…..

There is one question which I HAVE TO ANSWER:

‘How much money as a corpus do I need to retire?’ – and if I say Rs. 2.8 crores there is either a denial or followed up by another question – IS THIS CORRECT AND FINAL’. That question I have not been able to answer.

What a planner tells you is an approximate number. Cannot promise whether this will be correct PERMANENTLY! There are so many dynamics in the market – inflation rate, market performance, your health, your monthly expenditure (most of them do not have a number picked from excel, it is only an ESTIMATE). My argument is that based on

- estimated current monthly expenses

- estimated year of retirement

-estimated rate of return on the assets

- estimated year up to which the client will be alive

NOBODY – repeat NOBODY will be able to give you an EXACT estimate of what you require for RETIREMENT….

HERE is an article on Wall Street Journal read on…

http://www.smartmoney.com/personal-finance/retirement/retirement-math-is-best-done-in-pencil/

One major (I mean MAJOR) DRAWBACK is you have no clue what will happen once you finish the accumulation stage and go on to the withdrawal stage.

Let us say you have accumulated Rs. 500 lakhs in a NPS account. They allow you to withdraw say 50% of the amount and the balance has to be invested BACK in an annuity. Let us say you ARE FORCED to invest Rs. 250 lakhs in an annuity which pays Rs. 11,000 per month as a pension…looks good? Well depends on what you are capable of doing with your own money!

My suggestion is very simple. If a person has accumulated money in N P S, he should be allowed to withdraw HALF and the other half HE/SHE should be allowed to transfer to

- Senior Citizen Yojana or PPF. This will ensure that my corpus runs only the risk of inflation – from the age of say 70.

If certainty is brought to the end use of the NPS, I guess more people will be willing to save / invest in the NPS.

WANT YOUR FEEDBACK please…wish to forward the views of the people to the current powers that be in the NPS. Government will be more than happy to make this work….any other ideas?

Based on the feedback that I have got for this post (I did the original post on April 25) I need to clarify (this is dated 7th May, 2010) that what happens to the bulk of your money is more or less the same in any pension plan. So whether it is a Lic pension plan, a sbi pension plan, a Kotak pension plan, a Hdfc pension plan, a Max New York Life pension plan, a sbi life pension plan, a icici prudential pension plan, it does not matter.

Also the end use of the pension amount is the same immaterial of whether it is a traditional / classic pension plan or a unit linked pension plan. So whether it is a sbi ulip, Kotak ulip, Birla ulip, a Hdfc ulip or a lic ulip, reliance ulip, icici prudential ulip – if it is BOUGHT AS A PENSION plan, the end result is the same.

The Pension accumulator and ‘payer’ gets to keep A BIG CHUNK OF THE CORPUS and pay you a pension – and it may be very different from what a pension calculator said you need to live! So please be careful about ANY PENSION plan – not just the NPS!

She co-ordinates with his broker, banker, CA to file his tax returns. His car is taken care of by his administration – right from fuel to servicing, he knows nothing. He does not know where is passport, pan-card, HOUSE DOCUMENTS, gas connection, health and life insurance papers are kept. He carries his driving license (he needs in to enter airports you see!).

He says his life style is very simple – and he spends only Rs. 15-20,000 a month.

To me this is a joke. He and his wife eat out at least 6-10 times a month (his figures, not mine), he happily sends ‘gifts’ to friends and relatives. Any travel is air travel, any local travel is by a Honda Accord. His kids have flown the nest, however he has 2 servants, one cook, and a driver. On days the driver is absent, it is Meru Cabs or the company finds a substitute driver. Vacations are in 5 star plus hotels, Diwali card sending happens at company expense (oops I am harsh, am I?), medical expenses are company paid.

My estimate is he and his wife have a Rs. 100,000 per month life style if not more. His monthly electricity bill was Rs. 5440. He thought it was 1200-1300. He had no clue about his expenses – he had never kept track. Meeting me was not a pleasurable experience for him.

His estimate was he needed about Rs. 2 crores to retire, I multiplied it by a factor of 10. He baulked. No clue whether he will call me again.

If this is your story, re think and re consider – see where you stand. Make a realistic estimate of your expenses, then multiply it by TWO. Chances are you will be correct. If you have kept track of your expenses – writing it down or in excel – you will be right. If you are doing ‘mental accounting’ chances are you will be wrong. Dramatically wrong.

http://www.subramoney.com/book-written-by-me/

About the Book : – To most people retirement is an age. It of course depends on your health, the company you work for etc. However in the first chapter I would like to introduce you to the concept that retirement is an amount of money! After all, if you have that magical amount why not retire early?

The second chapter takes you through the steps and importance of planning, and to the dangers of not planning.

Like any financial goal, retirement is also a goal and has to be approached in a financial planning mode. So Retirement Goal Setting becomes a very important and is perhaps the first step in Retirement planning.

How much money is adequate for a person to retire? Here is a generic answer telling you what are the factors to consider while trying to answer this question. This chapter has many pointers and a calculator which leads you towards the answer. Remember this is dynamic.

Can you really retire by investing an amount as little as Rs. 40 a day? The answer is yes it is the power of compounding. If you do have or time on your side, it is possible to create a retirement corpus on an amount as small as Rs. 40 a day. And the fantastic thing is that this small amount can be got by making very simple changes in your life style.

If you have accumulated money for your retirement, you should also know how to withdraw. Here we deal with what is annuity, what are the methods of creating annuities, what options are available, and the works about annuity.

Retirement savings and investments are invested in various instruments. A book cannot really do justice to all the schemes that are currently available- neither has the author attempted that. There are books specializing in information about investment products which are updated regularly – like In the Wonderland of Investments by Mr. Shanbag.

A few chapters are devoted to answering how much and what type of insurance should you look at during retirement, the attitude of the Indian family to retirement, the need to make a will, some retirement blunders, etc.

What is interesting are the tables at the end of the book telling you how much to save and invest – and case studies about portfolio make over for retirement.