The Retirement Challenge

If you are at 40 are living a lifestyle of INR 50000 per month, chances are that you will think, "there is a long way to go for retirement". 

What you may not realise is that times have changed.

While 60 may be retirement age in letter, as far the spirit goes it no longer remains 60. 

The retirement age in India is rapidly climbing down owing to a very young median age of the population.

Young and competent people are always available as productive replacement for the older crop of employees.

Hence at 40, your job most likely could be your last one and you may be out of it by 50. 

So don't wait till 50 to plan for retirement. That perhaps would be a little too late.

Think of 40 as 50 and start planning for retirement. 

At 40, if you have saved about INR 20 lakhs, invest it in an equity or balanced mutual fund and for the next 10 years do an SIP of INR 40,000 per month.

(Both the Lumpsum and SIP amounts should be possible for a reasonably successful person of 40)

INR 20 lakhs Lumpsum and INR 40 K SIP should be able to ensure the same lifestyle of INR 50000 (inflation adjusted), till the age of 80.

Otherwise, if you wake up at 50, and even if you have INR 30 lakhs as savings, you will at max be able to maintain your lifestyle for 8 to 10 years only.

What would you then, between 60 and 80; a period of good 20 years !!

Wake up before you go go to your work today.

EMI Pain

He was 30. He decided to take a loan and buy a house like the rest of his friends.

For the next twenty years he paid an EMI of INR 50000.However, this EMI of his became an impediment in his investment path and because he failed to do an SIP. 

After 20 years, he at 50 is without a job. He lives in the same house and can't sell it.

Life has come a full circle as he stands at the crossroads of life wondering what to do.

A wife, parents and two children with just a house to live and a few lakhs in the bank with a long life ahead. 

These are those rare moments when one wishes for a shorter life.

As he stood there wondering what went wrong, he could see something very clearly.

"His EMI had hurt his progress?"

Had he lived in a rented house which in those days would have cost him INR 20,000 and had he invested the balance INR 30,000 in an SIP instead, the wealth he would have made would have been INR 6 cr. instead of the few lakhs that he currently had.

Even if he were to live a lifestyle of INR 200,000 per month for the rest of his life till the age of 80, he would just need INR 3.6 cr. out of the INR 6 cr.

With a residual INR 2.4 cr, he could have even opened an orphanage which had been his dream and thereby left behind a legacy.

He realised at that moment; the moment of truth that "EMI is slow poison & SIP is the key to Financial freedom".

(Above scenario is just an example. Rest depends upon Cash Flow of an Individual)

Irony of Life

You are a youngster earning a salary of INR 50000 per month. You are keen that your son do his MBA in IIM. You have 15 years time. An SIP of INR 10,000, which is only 20% of his salary, will meet your goal without disrupting your life.
Your boss is earning INR 1.5 lac per month. He also plans to see his son educated in IIM. But he has only 2 years time. His SIP value is INR 90000 which is 60% of his income and after accounting for his EMIs he is left hand to mouth.

You are planning your next holiday in Thailand and your boss is finding it difficult to take his family to Lonavla.

Financial Planning is important for each & everyone & quite often its realized too late. Better not to delay else it will decay your hard earned money.

"We are providing customized financial planning solutions, since 2005".