Skip to main content

New Retirement Age is 50

 

I recently met a woman entrepreneur who said, "I don't need a retirement plan," because she was going to continue working her whole life and she had enough real estate assets to fall back on. As is well-known, in India most individuals still invest in real estate believing that it gives good returns and is a security in bad times. However, what one doesn't realize is that with real estate prices stagnating, rental yields being low and the rentals not growing beyond a point; real estate is really not a good investment. One also misses the point that one may not be able to sell easily, at a desired price, when money is needed. 

The only thing certain in business is uncertainty. So if, for whatever reason, she is not able to generate a monthly income, the rental income alone may not be sufficient to meet the expenses and live through old age. 

These days I see more and more people not thinking about retirement planning because of a false sense of financial security. 

Retirement is just not what it used to be in the 1980s or 1990s, when people could easily retire at the age of 60 with a good pension due to high interest rates and good health, which would allow them to lead their lives the way they wanted to. Also, it was assumed that adult children would take care of parents. 

Things have changed a lot since then. People are no longer in secure jobs, which keep them employed till the age of 60. More and more organizations are letting go of older employees and replacing them with younger people at a lower cost. Most of these older people find it difficult to find equivalent roles, and they don't have an alternate career plan. Despite this environment, very few individuals actually have a financial plan in place for retirement. The problem is further compounded by growing aspirations and lifestyles. With couples having children late, they are getting into old age with huge financial responsibilities. Long-term savings that were kept for retirement, say, Employees' Provident Fund (EPF), are being used to fund large expenses such as children's education. With increasing life expectancy, and job insecurity, the failure to plan for retirement is a recipe for disaster. Not to mention the stress individuals will face if they have to live in a way they are not accustomed to or have to depend on someone. 

In the earlier days, saving in a provident fund was thought to be enough for the golden years. But these days, I meet people who actually lament the fact that they get lesser cash in hand because of these mandatory deductions. Many even use their EPF money to fund a house. 

Most people are thinking of today and prioritizing immediate needs over long-term savings. This has also to do with the fact that generation X and the millennials grew up in a simpler environment with little access to lifestyle goods; and now with easy availability of these items, the future planning is put aside. A survey recently found that 27% people contributed less to their long-term savings because of their current expenses on children's education. Also, most people tend to think that because they are earning well, their income will take them through retirement. 

That is not the case. Just earning a good income does not assure a comfortable retirement. 

Running a financial plan and knowing how much to save and invest early and regularly for retirement is the first step of retirement planning. Here are some of the other things that one can keep in mind: 

1. One needs to plan while keeping in mind a retirement age of 50 years because too many people these days say they are burnt out because of working 13-14 hours a day and feel that their careers are taxing them mentally, emotionally and physically. Many don't have a plan B if they get retrenched, and find it very difficult to find jobs commensurate with their current position. In such cases, people live in the false hope of finding new employment and do not cut back on expenses. 

2. Investing and holding on to long-term savings plans such as EPF, Public Provident Fund (PPF), National Pension System (NPS) and others should be sacrosanct. While some level of liquidity is available in these plans, one should assume that these savings are not available for anything else but retirement. 

3. Choosing investments with good risk-adjusted returns is, of course, important. In India, the tendency is to choose an endowment policy or a unit-linked investment plan (Ulip), which have historically given sub-optimal returns and don't even beat inflation. Pension schemes from insurance companies are no better. I find it strange that people are willing to risk their retirement, by not planning for it, but are unwilling to take risk on investments. A good mix of equity mutual funds is a must while investing for a retirement corpus.

4. Aim to finish-off loans by 40 years of age. The amount spent on loan instalments can be invested into equity mutual funds, which can grow well for the next 10 years thanks to the power of compounding. 

5. Automate investments. Too many people tell me that they have no money to invest. This is because when money is available in the account, it gets spent easily. Automating investments helps staying on a financial track as it ensures that you don't miss that monthly investment schedule.  





Invest Rs 1,50,000 and Save Tax up to Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds. Save Tax Get Rich

For further information contact SaveTaxGetRich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

OR

Call us on 94 8300 8300




 

Popular posts from this blog

Franklin India High Growth Companies Fund

Franklin India High Growth Companies Fund Online One of the key developments that the Street is keenly waiting for is a cut in interest rates by Reserve Bank of India . With demand rising gradually, a rate cut is expected to boost earnings growth for companies. In such a situation, schemes which invest in high growth companies are best suited, especially when seen from a long-term perspective. One such scheme is Franklin India High Growth Companies Fund. Fund managers Anand Radhakrishnan, Roshi Jain and Srikesh Nair strictly follow valuation parameters when it comes to choosing stocks.Valuation parameters, such as enterprise value, price-to-earnings growth ratio, forward price-to-sales ratio and discounted earnings per share, play a critical role in selecting companies for investments. Taking into account these parameters, the fund managers invest in companies which are poised for high growth in their respective sectors. This approach has been in favour of the scheme and it has perform...

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...

Avoid NFOs

  Don't get taken in by the flurry of new fund offers. You will be better off sticking to the tried and tested schemes.   For the past one year, to cash in on the bull run in equities, mutual fund houses have gone on a new fund offer (NFO) overdrive. But experts are unanimous in their advice: avoid NFOs . While past performance is not an indicator of how a fund will fare in the future, it does tell the investor how skilful the fund manager is. This crucial information is missing in an NFO. Not only is there no track record to judge an NFO by, many NFOs are similar to funds that already exist. If the new fund is similar to existing funds, you are better off investing in the latter. Around 67% of the new launches in 2014 were closed-end products. Investing in the NFO of a closed-end fund is doubly risky. In case the fund's performance is lacklustre, a closed-end fund does not allow you to exit. Even though closed-end funds are listed on the stock...

Debt Mutual Fund Dividends are Taxable

DDT is deducted when a non-equity fund declares dividends. Equity and balanced fund dividends are tax-free The AMC is correct to deduct the dividend distribution tax (DDT) as it is mandated by tax laws. DDT in mutual funds is deducted every time a non-equity fund declares dividends. Equity fund and balanced fund dividends are tax-free . It is possible that you have invested in a non-equity fund for the first time or have received the dividend under a non-equity fund for the first time. That is why this is the first occasion when you have come across DDT.   The rate at which non-equity schemes deduct DDT has also gone up after the July 2014 budget. This is due to a change in calculation methodology. Earlier, if the fund has to declare a dividend of R 100, it used to make a provision for R 128.3, paying R 28.3 to the taxman and distributing the balance to the investor. This allowed the investor to bear less tax since the effective tax rate was 22.07 per ce...

Mutual Fund Exit Load Changes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now