make your money grow, with you
shruti agrawal is a leap.club member, the founder of cagrfunds and one of the very few SEBI registered investment advisers. she’s extremely…
shruti agrawal is a leap.club member, the founder of cagrfunds and one of the very few SEBI registered investment advisers. she’s extremely passionate about changing the narrative of women not being good at managing their personal finances and has written this piece on retirement planning.
shrivastava uncle is 72 and his wife, manjula aunty is 68. they are my next door neighbours — extremely sweet and affectionate, they love to talk. they have three kids — all married and employed. uncle himself was a tax consultant till a few years ago. as he grew older, his ability to work 8 hours a day and scout for new clients declined. his existing client base (who was also largely retired) did not need his services anymore. aunty is a quintessential homemaker, devoted to the family ever since they got married. to me, they are a classic representation of the retired parental generation in india.
last sunday, we met over tea and aunty made some delicious pakodas. as I noted down her recipe, uncle advised me to go slow on fried food. two reasons — rising oil prices and rising healthcare costs. he said, the joy of fried food is “not worth it”.
now here is a couple who always lived a middle class lifestyle — moderate income with significant monetary commitments exclusively for their children, their education and their future. like every parent, they wanted their children to get the best education. but did they fathom what that best eduction would entail when it came to the spend? unfortunately not. so, for higher education, they ended up taking a loan. they bought a home early in life and the emis kept looming till after their second child got married. and for all the 35 years uncle worked for, his sole intention was to save enough for getting his three kids married off to the best of his abilities. but with rising costs of the pomp and show of weddings, his fixed deposits suddenly seemed meagre. what next? withdrawing his pf and ppf, ofcourse — because it is so much more fulfilling to walk your chin up in society than leading a comfortable retired life. so now, they have a handful of savings, minimal passive income and no monthly inflow. they definitely do not live the way they would’ve liked to.
takeaway — retirement is something we have a very limited vision for when we are younger. a regular flow of income every month makes us feel comfortable but we fail to continue the lifestyle once that income stops.
how do we then plan for 30–35 years of our life in a way that we do not have to take a hit on our lifestyle and neither do we have to depend on anybody else for financial support?
here are 7 simple steps that we can follow to have some kind of a plan for retirement:
ascertain the age at which you want to retire — assume a life expectancy of 85 years and know how many years of retirement you need funds for.
note down your current expenses and think about items which might become more important during retirement (example — medical bills).
use any online retirement calculator (check our calculator here) to know the corpus you need to accumulate for your retirement. this will also give you an approximate amount of how much you should invest per month to build this fund.
establish your risk appetite — the return you will be able to earn on your investments will be related to how much risk you take on your capital, how close you are to retirement and so on. therefore, this is perhaps a very important thing to know, and one which is not completely quantifiable.
once you know the amount you need to save, your comfort risk zone and how long you can stay invested for; you can now decide which instruments you should be investing in. depending on how much risk you want to take, it can be a mix of stocks, mutual funds, bonds and gold.
execute the investments — a plan is just a plan till it is put into action. compounding works wonders over a long period of time and the sooner you start planning for your retirement, the better.
review your plan and investments at least once a year. check if there are any changes in the expense structure that you had assumed and how does that change the planning for you.
overwhelmed? don’t be! starting out has its moments but be patient and it’ll definitely bear fruit. and if you are still feeling overwhelmed and need some guidance, there are advisors waiting for you to reach out and help with your retirement planning!