Retirement Planning

May 2005

Retirement Planning

May 2005 Retirement Planning . Most people do NOT have EPF/PPF cover.Why Save for Retirement? Many times the pension schemes like EPF and PPF will not be sufficient to continue your same lifestyle after your retirement. 90% of the working people do not have any organised pension plan. Only 10% of the workforce in India has access to EPF.

Why plan for retirement? Address long-term health care needs ± for self and family. Engage in productive. May 2005 Retirement Planning . Inflation is the invisible threat to financial security. satisfying activities post retirement. without asking for support from anybody (joint family structure is breaking). Live Independently.

When you retire some costs But other costs will go up may go down Loans may be paid off Higher cost for medical insurance & health care Filling your increased leisure hours with enjoyable activities may cost more Higher cost of living due to inflation Social work No expenses for raising a family Lesser Income Tax No work related expenses May 2005 Retirement Planning . people require 70% to 80% of last drawn salary to live comfortably after retirement.How Much Regular Income to Plan for After Retirement? According to experts.

000 20. medical expenses are likely to grow manifold. Over the next two decades. putting excess pressure on your savings. Are the savings enough to take care of rising medical expenses? Hospitalisation E xpenses in case of some common old age Illnesses Heart Attack Joint R eplacement Kidney/Organ Transplant P rostrate S urgery C ataract May 2005 Cost in 2002 (R E s) stimated Cost in 2023* 150.000 Retirement Planning .000 398.000 200.000 93.000 530.000 53.000 530.RISING COSTS: ARE WE READY FOR THIS? We have to prepare for Rising Medical Expenses.000 200.000 35.

Retirement« a long phase of your life Support family as well as save for retirement Age 0-20/25 (Education) Age 20/25 ± 55/60 (Working) Age 55/6090/100 (Retired) Parents support May 2005 Savings for retirement must last for this nonincome period Retirement Planning .

000 2.85.000 *Assuming just 5% rise in costs per year.000 2.000 25.90.000 8.60.20.000 42. May 2005 Retirement Planning .000 60.000 5.500 66.00.45.60.000 1.000 6.11.00.COST OF A VACATION Packages 14 days US Tour A 12 days Australia Tour 15 days E urope Tour 3-days Dubai P ackage 3 days S ingapore Tour 14 days North India Tour 10 days S outh India Tour Current cost for two Estimated cost in year persons 2023* 3.000 92.000 2.000 1.

beyond 75 years of age. on an average. May 2005 Retirement Planning . Therefore. Males & females in India at age 60 today are expected to live. we will need to have adequate resources to support you & your spouse for at least 20 years after retirement.How Long Will We Live? Life Expectancy has increased continuously over the last century because of improvement and advancement in medical facilities.

May 2005 Retirement Planning .When Should One Start Saving For Retirement? Start Saving now. 18.60. Let us assume that both get returns of 8% per annum on their investments. time is money! Let us take 2 examples: Lakhotia saved Rs 10.  Mr. Sharma saved Rs 10.71 lakhs at age 60. Total Investment = Rs 2.000  Mr. Lakotia receives Rs.60.000 every year from age 35 to 60. 8 lakhs at age 60. Since returns accumulate overtime. Sharma receives only Rs.  Mr. Total Investment = Rs 3.000 every year from age 25 to 60.000  Mr.

Sharma Accumulation of Savings May 2005 Retirement Planning . Lakhotia Mr. 2000000 1800000 1600000 1400000 Rupees 1200000 1000000 800000 600000 400000 200000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Years Mr. Mr. Lakhotia accumulated 133% more than Mr. That is the benefit of starting early. Sharma at age 60.By investing only 38% more.

807 28.225 454.119 17. May 2005 Retirement Planning .612 136.419 181.211 43.037 143. Capital Required to generate that income Target Income per Month after retirement for 20 years Years to retirement 10 years 20 years 30 years 10 years 20 years 30 years 10 years 20 years 30 years 10 years 20 years 30 years Annual Savings Required 90.Indicative savings required today to earn a steady post retirement income.062 10000 1420725 15000 2131088 20000 2841450 50000 7103625 Assumptions: Savings will grow at 8%.731 58.746 11.493 23.615 57. Annuity Rates are 6% at the time of retirement.

Thank You May 2005 Retirement Planning .

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