RETIREMENT - Aish or Without Cash

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.

There is no doubt India is going to be one of the strongest economy inspite of all the global, political or domestic factors.

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

MARKET SINKING - Feeling Happy???

MARKET SINKING - How do you feel

I might sound like a fool, if ask this question to an equity investor. No, but I really mean it, if  you are an investor, not the trader and recent market fall panic you, then you need to seriously relook at your portfolio or time has come to change your financial planner.

Proper financial planning will help you to avoid such tensions and enjoy life.Let's see how it insulates you from market fall.

Normally there are 2 stages in any investments, first is Accumulation and the other is Withdrawal.

Accumulation Stage : This stage means that you are accumulating certain predetermined funds for some  particular goals or dreams which might be 8,10 or 25 years away. As the goals are too far you have taken an exposure in equity market to earn inflation adjusted returns.

During accumulation stage you are not putting all your funds on day one but contributing amount at regular intervals.

So if I had invested X amount at a higher market level then the fall in market is giving me opportunity to buy the same at discount. Hence, market fall is a good news for me rather then to be tensed.

Withdrawal Stage : Financial Planning suggests not to have any investments in Equity market when you are closer to your goals. So, if market falls during this period it shouldn't bother you as your exposure to Equity market must be nil.

Historically, it has been proved that Indian equity market has given average 15% annualised return over a longer period of time and in short period it has given return ranging from -13% to +101% (considering Financial Year wise) and for certain other period might be in the range of -50% to +100%.

This includes periods of :

1) GDP Growth from 3% to 8.5% - How it makes a difference in long run if some of the rating agency downgrades GDP forecasts by  50 or 80 bps.

2) Natural Calamity : Drought, Tsunami,Gujarat Earthquake ,Mumbai Floods.

3) Tragedy : Bhopal Gas Tragedy, Violence in Valley, Ayodhya Riots, WTC Bombing, Indian Parliament attack, Mumbai Terrorist attack.

4) Scams : Harshad Mehta, Ketan Parekh

5) Tech Bubble, Sub Prime Crisis and now U.S Downgrading

6) 2 Prime Minister Assassinated

I Quote Warren Buffett " Time in the Market is more important than timing the market".

Unquote, Inspite, of having all the bad phases which we can expect in an economy we have grown consistently.

Instead of getting worried about the market movement we should stick to the basics of Financial Planning to have the optimal benefit.

I am not Anna - I should not be

I AM NOT ANNA - and you should not be.

Anna really did what none of our leaders could do since decades. I strongly support his protest against corruption and condemn the action taken by government by not allowing him to protest , which is the constitutional right of every citizen in democracy.

I AM ALSO ANNA - Rather why me every citizen in the world would be Anna for fight against corruption. But should not be Anna for EVERYTHING he is asking for.

To support any decision/policy/Draft the basic requirement is to read it thoroughly and understand its impact. I doubt how many of Anna's supporters has really gone through the draft.

The time has come to be matured enough, that instead of blindly supporting a person, we should support his views or policies. For that we need to keep our mind open and try to see the big picture instead of what they show us.

We as an human being has an habit of following anyone blindly, whether it is some gurus, sportstar, Bollywood star or politician and if anything goes wrong start cursing them.

As they say "Error is to Human".

I request all of you to first go through the draft of proposed Jan Lokpal bill and understand the repercussions of each and every clause before supporting it.

As an citizen of India I feel if the Jan Lokpal bill is accepted in the format as proposed by Anna then it would be a much bigger threat to sovereignty of our nation then existing menace like corruption.It would put our growth on hold. Country will come to a stalemate. If you can win confidence of 10 members under lokpal you can easily rule India. 

I produce below Structure of Jan lokpal bill :(You can access full draft on www.indiaagainstcorruption.org)

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Structure of Lokpal

Jan Lokpal Bill proposes that at the level of Central Government, an institution called Jan Lokpal should be set up. Likewise, in each state, Jan Lokayukta should be set up. Jan Lokpal will accept corruption complaints against Central government departments and Jan Lokayukta will accept complaints against departments of respective state government.

Each of these bodies will have 10 members and one Chairperson.

a. Independence of Jan Lokpal and Jan Lokayukta

Jan Lokpal and Jan Lokayukta would be completely independent of the governments. Their independence would be ensured through following measures:

(i)   Administrative independence

They will be independent agencies like Central Election Commission, Comptroller and Auditor general of India and Supreme Court. Therefore, no politician or a bureaucrat will be able to interfere with its functioning.

(ii)  Financial independence

Their expenses will be charged to the Consolidated Fund of India/State. They will be provided whatever expenses they require.

(iii)  Manpower

They will have powers to assess their manpower requirements and employ them either from existing government servants (who can come on deputation basis) or directly from the market.

b. Single anti-corruption agency

Anti-corruption branch of CBI, CVC and departmental vigilance wings will be merged into Lokpal. Anti-Corruption Branch of Police, state vigilance departments would be merged into Jan Lokayuktas. In 1986, when Karnataka Lokayukta was created, all existing anti-corruption and vigilance agencies in the state were merged into Lokayukta.

Presently, we have institutions of Lokayuktas in 18 states. They are merely advisory bodies. They neither have resources nor powers. They will be replaced with Jan Lokayuktas through Jan Lokpal Bills.

c. No more advisory bodies

Jan Lokpal and Jan Lokayukta will not be advisory bodies. They will have powers to start investigation or prosecution in any case. For that, they will not need permission from any government agency.

Jan Lokpal and Jan Lokayukta will also have powers to impose departmental penalties on bureaucrats."

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If the above conditions are accepted then Jan lokpal would become the most powerful body. In a democracy  how can be a privately elected body can be more stronger then formed be people's representative.

It means to take control of our country you just need to have command on these 10 people, and I think which is not a difficult job at all.

I have full faith and there is no doubt in credibility of Anna. But he is not going to be there for ever.

So, before supporting such a big issue please go through each and every minor details.Even after that if you agree to the draft, then we have constitutional right to protest against government and we should do it.

Request you to bring awareness and share it with everyone you know.