100 Years ago, life expectancy in India was 25 Yrs and in US around 50 Yrs
Today it is 70 yrs and 78 yrs respectively
Good news - We will live longer
Bad news - Folks want to retire early so the risk is not having enough income during old age!
How to combat this? A thread -
Today it is 70 yrs and 78 yrs respectively
Good news - We will live longer
Bad news - Folks want to retire early so the risk is not having enough income during old age!
How to combat this? A thread -
1/n
People will retire at the age of 50-55 and then need a portfolio to help them survive for the next 20-30 years atleast
3 important things in my view
A good Sized corpus, Margin of Safety and Medical Insurance
People will retire at the age of 50-55 and then need a portfolio to help them survive for the next 20-30 years atleast
3 important things in my view
A good Sized corpus, Margin of Safety and Medical Insurance
2/n
A Good Corpus -
- Assume you are aged 45 today
- Your yearly expenses are 10L a year (in today's value)
- You want to retire in 10 Years (Age 55)
- Assuming 7% inflation, this will double in 10 years, so you will need Rs 20L a year
- You will need Rs 3.2 Cr
A Good Corpus -
- Assume you are aged 45 today
- Your yearly expenses are 10L a year (in today's value)
- You want to retire in 10 Years (Age 55)
- Assuming 7% inflation, this will double in 10 years, so you will need Rs 20L a year
- You will need Rs 3.2 Cr
3/n
Calculation -
- You need a corpus 16x of your expected yearly expenses
- Letβs say you need Rs 20L a year - you need a corpus to of 20*16 = Rs 3.2 cr
- Logic - on Rs 3.2 cr - 20L can be withdrawn without eroding principal (6.5% returns) - An Annuity is built
Calculation -
- You need a corpus 16x of your expected yearly expenses
- Letβs say you need Rs 20L a year - you need a corpus to of 20*16 = Rs 3.2 cr
- Logic - on Rs 3.2 cr - 20L can be withdrawn without eroding principal (6.5% returns) - An Annuity is built
4/n
Margin of Safety -
- You can build a larger corpus for retirement from where you can withdraw and put the extra yearly interest in slightly riskier assets
- This can be again diverted to fixed income after say 5-7 years
Margin of Safety -
- You can build a larger corpus for retirement from where you can withdraw and put the extra yearly interest in slightly riskier assets
- This can be again diverted to fixed income after say 5-7 years
5/n
Health insurance -
- Health Insurance is a hedge against Poverty and out of pocket medical expenses (that can dent your finances/savings/peace of mind)
- Don't take it lightly because a Middle class Indian Household is one medical emergency away from poverty!
Health insurance -
- Health Insurance is a hedge against Poverty and out of pocket medical expenses (that can dent your finances/savings/peace of mind)
- Don't take it lightly because a Middle class Indian Household is one medical emergency away from poverty!
6/n
Living longer poses a larger risk than passing away too early (Financially speaking strictly)
An early Death can be resolved at any age i.e. by buying a term plan
But living much longer can be dangerous thing if one doesn't start early it will be behave as slow poison
Living longer poses a larger risk than passing away too early (Financially speaking strictly)
An early Death can be resolved at any age i.e. by buying a term plan
But living much longer can be dangerous thing if one doesn't start early it will be behave as slow poison
7/n
Steps to build a good retirement corpus effectively -
- Start Early (Compounding is more about 't' less about 'r')
- Step up investments with a hike in Salary (A 15K SIP per month for 25 years is 4.92 Cr at 15% returns. The same with 10% hike every year is 10 Cr)
Steps to build a good retirement corpus effectively -
- Start Early (Compounding is more about 't' less about 'r')
- Step up investments with a hike in Salary (A 15K SIP per month for 25 years is 4.92 Cr at 15% returns. The same with 10% hike every year is 10 Cr)
8/n
- Retirement planning should be done from Day 1 not when you are nearing Retirement (or else it will be too late)
- Rule of 16/20 - 16-20x annual future expenses
- Health Insurance is a MUST (Comprehensive policy - no co pay, no room rent limit, condition cooldowns)
- Retirement planning should be done from Day 1 not when you are nearing Retirement (or else it will be too late)
- Rule of 16/20 - 16-20x annual future expenses
- Health Insurance is a MUST (Comprehensive policy - no co pay, no room rent limit, condition cooldowns)
9/n
- Buy a personal Health Insurance even if an employer has given you one
- Buy a super top up of Rs 1 Cr on your base health insurance policy
Thanks to @connectgurmeet and @AnkPahuja for inspiring this thread through one of their conversations
- Buy a personal Health Insurance even if an employer has given you one
- Buy a super top up of Rs 1 Cr on your base health insurance policy
Thanks to @connectgurmeet and @AnkPahuja for inspiring this thread through one of their conversations
@connectgurmeet @AnkPahuja 10/n
End of thread, Thanks for reading
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Stay tuned, i will do more personal finance threads!
End of thread, Thanks for reading
Retweet the thread here -
Stay tuned, i will do more personal finance threads!
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