| Retirement is a financial challenge for most in India. | | | | and equity based mutual funds could form larger |
| What one saves through working life can seem less | | | | portion of your portfolio when you are younger (say |
| than adequate for the 'peaceful' years of retirement. | | | | 70%) and move to a more stable portfolio as you |
| Increasing life spans make it critical for people to plan | | | | arrive into your 50s (deposits, real estate and bonds |
| for 25 + years of retirement, inflation continues to | | | | forming most of your portfolio). Many people forget |
| erode savings and interest rates continue to | | | | to create a portfolio and put all their eggs in one |
| moderate as the Indian economy matures. What | | | | basket - typically real estate ! |
| should you do if you are intent on having a pleasant | | | | 4. Leverage early: Another way to create wealth |
| retirement ? | | | | over the longer term is to take loans wisely. Home |
| 1. Set your target: It is important to know what | | | | loans are an important instrument that one could use |
| amount of money, in today's terms, you would need | | | | from fairly early in life. It has been observed in most |
| at your retirement. For example, if you are 35 years | | | | developed countries that people build property assets |
| of age and think that Rs 25,000 per month (in | | | | by taking loans and upgrading throughout their life. |
| today's terms) is a good sum for retirement, plan to | | | | Home loans also offer tax advantage. While home |
| retire at 65 and hope to live till 80, then you can | | | | loans can be useful, excessive debt on credit cards, |
| expect to require close to Rs 1,10,000 every month | | | | personal loans or margin lending (against stocks) can |
| in the 66th year. This is simply because inflation | | | | be dangerous - use such debt only with care. |
| continues to lower the purchasing power of your | | | | 5. Manage your portfolio: It is normally wise to take |
| money. To get to this number, you should plan to | | | | profits along the course of your investment period |
| have savings of approximately Rs 2 crores (Rs 20 | | | | and reinvest into the lows. While very few can time |
| million) by the time you retire. If you want to | | | | markets, it is important for investors to remain |
| maintain your lifestyle, this pool needs to be closer to | | | | flexible in terms of liquidating assets, booking profits |
| Rs 4 crores (Rs 40 million) in your 80th year ! | | | | and waiting to pick new assets at the lower end of |
| 2. Start young: Only way to do this is to start young. | | | | price cycles. Being brave is key, especially in turbulent |
| A typical rule of thumb is to save up to 30% of your | | | | economic times. |
| gross salary through your working life. Compound | | | | 6. Plan tax wisely: It is important to plan taxes well. |
| interest helps the savings pool grow in a healthy way | | | | There are approved tax breaks like the ones on |
| even as your earning and savings power increase | | | | home loans and 80c that should be considered |
| over the course of your career. | | | | carefully. In closing, it must be highlighted that the |
| 3. Create a portfolio: Build a balanced portfolio | | | | above ideas are just pointers. It is important that you |
| throughout your life. It should have a good mix of | | | | seek advice on your finances and taxes from |
| real estate, stocks, mutual funds, bonds, deposits | | | | professionals early on. Should you find good ones, |
| and possibly gold. The riskier assets like stocks and | | | | there may be a chance of getting to the number ! |