As an Indian we feel really proud to be one of the youngest country. But, there was time in 80's and 90's when the biggest worry for our country was rising population and because of that reason we started the campaign "Hum do Hamare Do". Today the same worry has become one of the biggest boon for our economy.
Thanks to one of the report made by Goldmann Sachs way back in 2002 which brought this fact to limelight and resulted in biggest rally in the history of Indian equity market.
India has more than 50% of its population below the age of 25 and more than 65% hovers below the age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years, compared to 37 for China and 48 for Japan.(source : wikipedia.org)
Population by Age and Sex for India
| ||||
Year
|
Age
|
Both Sexes Population
|
Male Population
|
Female Population
|
2011
|
Total
|
1189172906
|
617039156
|
572133750
|
2011
|
0-4
|
118325346
|
62740231
|
55585115
|
2011
|
5-9
|
117592252
|
62539569
|
55052683
|
2011
|
10-14
|
116948795
|
62170835
|
54777960
|
2011
|
15-19
|
112247754
|
59507362
|
52740392
|
2011
|
20-24
|
105137174
|
55103535
|
50033639
|
2011
|
25-29
|
99548997
|
51787772
|
47761225
|
2011
|
30-34
|
93102734
|
48164565
|
44938169
|
2011
|
35-39
|
86435208
|
44407222
|
42027986
|
2011
|
40-44
|
76764881
|
39235679
|
37529202
|
2011
|
45-49
|
64989219
|
33146269
|
31842950
|
2011
|
50-54
|
54272103
|
27595085
|
26677018
|
2011
|
55-59
|
44170733
|
22361010
|
21809723
|
SOURCE : U.S.Census Bureau, International Data Base.
But while looking at sparkling and shiny picture we forget there is one more fact hidden in the above data, From the above data it is clear that in next 25-30 years almost 50% of our present population would enter retirement.
For an average human being retirement age means to depend rest of his life on retirement corpus created during working span of his life. Just to understand effect of Inflation on our household exps.(inflation@8%) The cost of present household exps. valued at Rs.25000 per month would become Rs.251000 PER MONTH after 30 years and would be Rs.1175000 PER MONTH i.e 1.41 CRORE PER YEAR after 50 years. It really seems funny to talk of 50 years. But it is the fact of life for youngsters who are in 25-40 age group and should be eye opener for them to reconsider the amount of funds they might require in retirement age.
 |
| Future value of Exps. @8% Inflation rate |
Post Independence the average age of an Indian was in the range of 50-55 years. But due to improved medical facilities and newer technologies it has gone up to 75-80 years(in urban India) and don't be surprised if it moves up to 95-100 years in next 30 years.
We need to seriously consider our retirement planning at an early age of our carrier or as soon as we realise its need. The biggest factor which can help us in accumulating such a bigger corpus is power of compounding and proper asset allocation.
Illustration: Let us consider that Shahid Kapoor is an young, dynamic IT employee whose age is 30 year. He plans to retire at age of 58 and he considers his expected life to be 90 years. His present household expense is Rs.25000/month and considers it to be same even after the retirement age. He feels inflation pre and post retirement to be 8%.
Now, considering above his house hold expenses at the age of 58 would be Rs.2588132.00/Year and if he manages to get return 2% more then the inflation rate post retirement i.e 10% (Net of Tax). He would need to have a retirement corpus of 6.32 Crore.
Particulars
|
Amount
|
Total Monthly Expenses
|
25,000
|
Total Annual Expenses
|
300,000
|
Inflation
|
8.00%
|
Current Age
|
30
|
Retirement Age
|
58
|
Life Expectancy
|
90
|
No. of Years for Retirement
|
28
|
Expenses in the First Year of Retirement
|
2,588,132
|
Retirement years (life expectancy-retirement age)
|
32
|
Inflation during Retirement Years
|
8.00%
|
Investment Returns on Retirement Corpus
|
10.00%
|
Net Returns
|
1.85%
|
Retirement Corpus Required
|
63,216,858
|
Deficit (Corpus Required-Assets Utilized)
|
63,216,858
|
No of Years for Retirement
|
28
|
Expected Investment Returns
|
15.00%
|
Lumpsum Funding Required (If Available)
|
1,262,680
|
Monthly Investments Required
|
12,352
|
It seems to be impossible to accumulate the above amount during the working tenure of 28 years for an average person. But it requires much lesser then the EMI you pay for your Sedan (car) , expecting a return of 15% you require to invest just Rs.12352.00 per month. So delay your purchase of car or house by 3 or 5 years and safeguard your retirement.
As there is no social security system available for citizen of India we need to plan and protect our retirement life ourselves. Many of Central or State government or employees Covered under EPF feel relaxed that their retirement would be taken care of by there EPF account. Just showing below the value of EPF account of Mr.Shahid Kapoor present salary Rs.35000/Month and expects to appreciate 10% YOY.
Sr. No
|
Particulars
|
Values
|
1
|
Current Age
|
30
|
2
|
Retirement Age
|
58
|
3
|
Monthly Salary (Basic+DA)
|
35,000
|
4
|
Increase in Salary
|
10.00%
|
5
|
Contribution from Salary
|
12.00%
|
6
|
Current EPF Balance
|
0
|
7
|
Rate of Interest
|
8.50%
|
8
|
Value at Retirement
|
33,559,758
|
So, the deficit for retirement fund is huge even after considering the EPF maturity.
Although modern medical science has increased the life expectancy but has increased medical expenses substantially.What if someone meets up with some of the critical illness or might result him to be bedridden during his working tenure or Retirement age.
Now a days it's easily noticeable that in every household there is atleast one of the family member who is taking medicines on daily basis.That too 2-5 pills a day.
It is the high time that we should give priority to retirement planning , otherwise it can happen that today we are moving in a luxurious car or living in a bigger house but after retirement might need to move to a smaller house or settle for an economy car or even need to cut down on statutory house hold expenses.
Remember, if planned properly retirement life can be the golden period of our life as these is the only period when we would have ample time and if have sufficient money can do everything which we couldn't do during working span due to job, aspirations or family commitments.
SO PLAN YOUR RETIREMENT TODAY ONLY AND HAVE A GREAT LIFE AHEAD
No comments:
Post a Comment