Retirement Planning : For the Young at Heart 

One of the greatest advantage of retirement planning  is it forces us to plan our finances .When it comes to budgeting or financial planning there are two extremes . I had one friend who will keep track of every dollar spent . Will meticulously file all bills , take regular printouts of all credit card statements and file them , analyze them , plan his expenses etc.

Then I also have a friend  who has no clue where his money goes . He had 15 EMI running for home to his last three vacations , car , AC etc . If some fine dining restaurant starts  offering EMI for a dinner he for sure will grab that. He will run out of his salary by the 28th of the month . Somehow manage to into the next salary to pay next months EMI.

Most of us are somewhere in between these two extremes. However these examples shows the need for having a plan . Thus whatever be the income we have to start the process of disciplined saving for the future .

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Our   plan for retirement tend to be very number oriented .

1. At what age do you plan to retire ?
   
   
2. What are your present income and expenses ?
   
   
3. Expected future income and expenses
   
   
4. What are your assets and liabilities ? House , Mortgage payments , Personal Loans etc
   
   
5. Your family size , kids age , education plans , wife working and income etc
   
   
6. Tax liabilities
   
   
7. Planned major events , children going to college , buying a bigger house etc
   
   
8. Expenses after retirement
   
   
9. Expected rate of  return
   
   
10. Expected rate of inflation
    
    

The endeavour is to optimize all the variables and arrive at an acceptable solution . The solution can be one or a combination of the following :

1. Cut down expenses
   
   
2. Increase retirement age , take up other employment after retirement to keep earning
   
   
3. Reduce return expectations
   
   
4. Increase annuity purchase
   
   
5. Make more/less  aggressive investments : increase / decrease risk in investments
   
   
6. Diversify investment portfolios
   
   
7. Move to a smaller property to reduce mortgage liabilities
   
   

The final recommendation  will have to be decided on a case to case basis based on the individual requirements. The same has to received at least once a year in absence of any major event . In case of any major event that will have a bearing on the plan the plan has to reviewed at the earliest after the event.


However one important unknown factor is the health related expenses .The need for keeping in good health cannot be overemphasized . When we look at the inflation in health related costs it is much higher than the overall inflation rate .


In India for instance the general Inflation is coming down supported by falling Oil prices health cost inflation continues to be at double digit levels .


So staying healthy by cultivating healthy habits can considerable reduce post retirement expenses . I point to ponder over . Send us your thoughts on this? How much is the medical costs you have budget for ?


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All of us wants to retire early and spend quality time in doing things we always wanted to do, We want to retire and go for the long holidays to Iceland.  We want to see the icebergs before global warming melts them down . Before the water level rises and drowns our small island .


So we nurture dreams of retirement from active work . But not from active life . We want to live life on our own terms . We seek freedom from the time clock and grumpy bosses.


We are in the process of  collection of some of the common questions that people keep asking on retirement . Hope this helps to clarify some of your doughts . We will develop a Q&A for investments for retirement planning .


Do send in your questions by 10th October ‘15  to have them answered . It will be our endeavour to include answers to all of your queries .


Write to us at  Shouvik@9rupee.com ​


Update : ( Some of the questions that we have received are as follows . Send us your questions and we will answer them )

1. I am only 30 years old . When do I need to start planning for retirement ? Is it not too early for me ?
   
   
2. My expenses are too high now. I do not have enough money for saving for retirement ? I will save for retirement when I earn more !
   
   
3. How to I know how much I should save for my retirement ?
   
   
4. What is  ‘ longevity risk ‘ ?
   
   
5. How can I reduce the amount of money required on my retirement ?