Retire Rich - Invest Rs. 40 a Day - C.V. Subramanyam (CNBC TV18)

 

This was my 2nd of 2021,but the first which I started on the morning of 1st Jan, and finished the same day. Reading Retire Rich - Invest Rs. 40 a Day by  C.V. Subramanyam (CNBC TV18); came in as a mandate, though it was lying just in front of me, for the last four months, in the books to be read. 

You retire when you stop being part of the work force, either by choice or by force – i.e. having reached the age limit prescribed by the government or being the function of profession.

Generally gymnasts retire at 20 ,  crickets at 35, salaried employees at 58 or 60, professionals like doctors/lawyers/CA’s when their bodies don’t listen to their mind and politicians never retire!

Sometimes retirement is a choice, sometimes it is forced may be due to unforeseen circumstances like ill health.

To understand how retirement would be like; there are two interim similarities:

·        Temporary retirement – Taking vacation is kind of temporary retirement. You do not earn income, but have expenses to meet.

·        Semi-retirement – Cricketers once they attain certain age; stop playing certain format as we see some players choose not to play Test cricket and gave up one day, but decided to play T-20.

You will understand that the most important aspect in how well you manage your money during:

·        Investing stage and

·        While in retirement

It is a huge challenge because most of us would not have pension; except for Central Government Employees. So we need to invest such that, our money would grow, and outlive.

How much wealth is needed for retirement:

It would depend on lifestyle you desire; other factors can only be estimated.

Basically what you need is:

·        Estimate your desired annual income

·        Find out how much you have in your investments

·        Estimate your expenses post retirement

·        Estimate your post-retirement income

·        Approximate number of years your savings will last  i.e.(Projected retirement savings/Amount to be funded form other savings each year.

·        Be mindful of inflation

·        How long you would live

 Example:

Sl.No	Particulars	Amount
A	Desired annual income in today’s rupees
B	Present source of retirement income: Pension, Divident, Interest, Others
C	Current retirement Income
D	Amount to be funded from other savings (FD, Other investments) (B-C)
E	Projected value of today’s investment
F	Other contributions toward retirement
G	Projected retirement savings (E+F)
H	Approximate number of years your savings will last (G/D)

 Thus you need to know how much money you have, how much are your current expenses, your projected expenses, how much you will need as a corpus and you will have a fair indication of how much income you can generate in retirement.

The various yeild (%pa) for varied instruments you could contemplate investing in are PPF - 8%; Sensex -18% and Equity - 21%.

Factors that would go into successful retirement planning:

·        Timing of retirement

·        Lifestyle

·        Location where we live

·        Physical and mental preparation

·        Being self-sufficient

·        How many people you would need to support during retirement

·        How much money you would want to leave after your death

·        Would you need an advisor to do retirement planning

Your retirement life should be distributed into at least 4 parts; say for a person retiring at 55:

55-65, 65-75, 75-85 and 85-95. 55-65 should be semi retirement ; where you continue to earn some income, withdrawing from capital is something you should consider after 75 years.

“The question isn’t at what age I want to retire, it’s at what income” – George Foreman

Mistakes to avoid if you want your retirement plan to be a reality:

·        Utilizing retirement fund much before retirement

·        Not having a plan

·        Paying taxes because of improper planning

·         Not looking after your health – physical and financial

·        Paying too much for help

·        Retiring when you need a break 

    One of the key requirement for retirement is having the Will. This is a legal document dealing how you want your assets to be distributed on your death. You may also stipulate how you wish to be cremated/buried or who you would like to take care of any surviving dependent family members. It is very important to be quite specific about your wishes for the distribution of special assets such as the antique grandfather clock, the classic silver tea set or the antique piano and the Whole Life Insurance. 

·        Hoping that someone else will take care of you (including kids)

There are certain terms one need to know for retirement planning:

·        Defined Benefits: This is where the benefits provided to an individual after retirement is known. Example Gratuity; Government pension

·        Defined Contribution: Here your contribute fixed amount, and these are managed by some third party like your Provident fund.

Pension:

Of late other than pension for government employees, we have other pension schemes as well. It is a Defined Contribution scheme.  Here one should know:

·        What is the minimum contribution

·        Who will manage the invested money

·        What about asset allocation – Debt or equity

·        What are the withdrawal options

·        Who are the people we will have to deal with and what are the charges

·        What are the limitations of the scheme

·        Will the fund management skills be good

·        Are the charges reasonable

·        Is the tax situation friendly 

Its     Its important to have a will at the time of retirement. Remember: 

        Start Small. Start Simple. Save Big! Then invest it.