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Retirement Planning

Retirement Planning. Presented by B.Srinivasan, M.Com., LL.B.,CFP CM. Shree Sidvin Financial Services & Investment Pvt Ltd. CERTIFIED FINANCIAL PLANNER CM.

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Retirement Planning

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  1. Retirement Planning Presented by B.Srinivasan, M.Com., LL.B.,CFPCM Shree Sidvin Financial Services & Investment Pvt Ltd
  2. CERTIFIED FINANCIAL PLANNERCM CERTIFIED FINANCIAL PLANNERCM (CFPCM) Is the highest professional designation in Financial planning, and is recognized worldwide A CFP must meet – 4 Es:- Education and Examination requirements, Experience, and adhere to the FPSB Code of Ethics In India, only the Financial Planning Standards Board India is licensed to award CFPCMcertification
  3. What best describes your reaction about retirement? Ready to face Horrifying feeling Mixed feelings Cross the bridge when it comes
  4. Have you ever discussed post retirement life to a retired person about what retirement is like?
  5. A survey by Financial Planning Association of more than 1,000 Americans aged 45 with health insurance reveals the attitudes and habits regarding retirement planning. Nearly 20% have spent "no time" in the past year actively planning for retirement, and more than 30%don't know what to anticipate for health care needs. 60% who have spent time planning for their retirement, spend the same amount or more time on home improvement than on retirement planning. And 60% spend the sameamount or more time planning for their children's college education. What's even more amazing, 31% of pre-retirees would ratherclean their bathroom or pay bills than plan for retirement
  6. Retirement has different meanings 20s 30s 50s 60s 40s 70s
  7. Retirement Planning
  8. Goals Own house Children education Children marriage Retirement of self & spouse No pressure from family or peers for savings towards RETIREMENT.
  9. Inflation-Cost of living A PERANNIAL CURSE FOR A RETIRED PERSON
  10. CPI data
  11. Consumer Price Index
  12. Inflation erodes the value of your money The slide illustrates the value of Rs 1 Lakh at different stages assuming an average inflation rate of 6%
  13. What do you think this graph is depicting
  14. Petrol price chart - Kolkata
  15. Inflation-Medical expenses
  16. Actual cost of treatments-
  17. Life expectancy
  18. Standard of living INCREASING THE STANDARDS IS EASY BUT MAINTAINING THE SAME????
  19. Standard of living- Effects cost of medical expenses Pre-retirement Medical cost going up as people want to only go to high end hospital with all facilities. And most of time company insurance may support to greater extent. Post retirement Medical issues are more frequent & medical insurance is our responsibility.
  20. Family system is changing Sandwich Generation
  21. Dependency ratio
  22. Population ratio Today 25% of INDIA’s population is under 25yrs. Study shows that by 2050 India’s Retired & Children population will be equal
  23. No social security INDIA IS A UNIQUE COUNTRY WHERE YOUR FUTURE IS ENTIRELY IN YOUR HANDS Consider this: In our country, around 87% of senior retired citizens do not receive pension
  24. No social security Consider this: According to LIC -Among the working population in India only 11% has any form of social security for old age. * (Source: Document on Pensions, Life Insurance Corporation of India, 2004).
  25. In Europe retirement age extended to
  26. View on retirement Of the Business clan FAILURE TO DIFFERENTIATE BETWEEN PERSONAL RISK/NEEDS and BUSINESS RISK/NEEDS PRESUMING THAT THE CONTROL OF BUSINESS WILL ETERNALLY BE THEIRS
  27. I'm too busy to know about it It's too early to think of it It's too late to think of it, Let the life go on I don't need to plan I don't have enough money to get started My finances are a mess My family will take care of me, I don't need to plan for it I have investments provident fund and pension plan, I'll be prepared for retirement I don't want to think about it I don't know how to plan
  28. 7 Key Dynamic’s Age at retirement Years in retirement Corpus needed/Income needed Investment options during retirement? Investment rate of return Inflation rate Health
  29. Aspect No- Age at retirement? How many more years to work?
  30. What age do you plan to retire? 66 - 70 61 - 65 56 - 60 51 – 55 Never 
  31. Working longer Increased savings Increased benefits Fewer years to provide retirement income
  32. Aspect No- Number of years in retirement?
  33. How long are you ‘going’ to live?
  34. Of the retirees and pre-retirees Who guessed the age they could expect to live, 4 in 10 underestimated the age by 15 or more years. 2 in10 underestimated it by 10 to 15 years. More significantly, only 2 in 10 retirees correctly responded
  35. Aspect No- Amount of Corpus needed/Income needed
  36. CanYou? Live on 50%, 60%, 70%, or 80% of current income?
  37. “It depends!” Lifestyle Health Inflation
  38. How much to save? Have you calculated how much money you need to save by retirement?
  39. Retirement corpus needed Regular monthly expenses- 30,000 p.m Current age- 40 yrs Spouse age- 37 yrs Retirement age- 55 yrs Life expectancy- 88 yrs Investment return pre-retirement- 10% Investment return post-retirement- 8%
  40. Corpus needed
  41. Aspect No- Investment options during retirement?
  42. Diversification Stocks & Bonds Mutual Funds Real Estate Bank Fixed deposit Post Office – PPF – NSC - KVP Commodities – GOLD & SILVER
  43. Asset Allocation You have worked hard to earn money, now make the money work hard for you
  44. Aspect No- Investment Rate of Return? Before retirement? During retirement?
  45. Aspect No- Inflation rate?? Before retirement During retirement
  46. Last but not least Health??? Invest in healthy choices now so you don’t have to spend as much money during retirement on health related issues
  47. Health/Medical issues Medical facilities earlier were not upto standards- only tried to find a cure. Now its- Diagnosis-prevention Now facilities are available because of the medical advancement but is expensive.
  48. Power of compounding To achieve a corpus of 1 Crore @ 12 % return p.a
  49. Start Early
  50. WHO DO YOU THINK WILL HAVE MORE MONEY AT 60?? Value on retirement (age 60) RAM - 1,09,26,001/- Shyam- 1,08,56,605/- Retirement planning starts the day we get our first income.
  51. Ideal cash flow Income Savings Expenses Revenue from long term investments Investments Long term Short term
  52. Post retirement habits
  53. WHAT TO DO NEXT
  54. Retirement Planning Retirement doesn't mean “stoppage of work” it means “freedom from compulsion to work for money” - FINANCIAL FREEDOM
  55. 6 Solutions Spend less, now & later Work longer Do not withdraw retirement savings Work during retirement Consolidate your assets Reduce the risk profile
  56. Measures that one has to take 1. Create an EMERGENCY FUND- Does an EMERGENCY give a prior notice. How much- 6 months of the income/expenses.
  57. Savings habit Income Savings Expenses Don't save what is left after spending; Spend what is left after saving Beware of little expenses; a small leak can sink a large ship
  58. Measures that one has to take Long term savings It is the small drops that make an ocean!! Invest regularly to achieve the long term goals
  59. Barber Laimon Probability calculator Probability Calculator Retirement Success PROB >= 90% Retirement Success PROB < 90% Scenario 1 Lower Spending Scenario 2 Use Other Assets
  60. Risk Capacity Seven easy steps to the ‘Safe retirement process’ Step 1 Step 2 Define Income & Expenses IncomeExpenses Social Security Fixed Pension Discretionary Other Contingency ____________ ______________ Total Income Total Expenses Inputs into Probability Calculator Portfolio Value Age & Gender Income Requirement from Portfolio Check for consistency Check for consistency Output from Probability Calculator Retirement Margin of Safety * The asset allocation that provides: MAX (PORB Successful Retirement) *The allocation can be manually adjusted Asset Sustainability * Given the asset allocation, provides: PORB (increased portfolio value) *current portfolio value over perpetuity Step 3
  61. Retirement Capacity assessment: (PROB Successful Retirement) from Portfolio 90% + PROCEED TO Step 4 < 90% PROCEED TO Step 5 Step 4 Step 5 Check for consistency Best Allocation Decision (%Stock, % Bonds) Attitude towards Stocks Exposure %Stock %Bonds Conservative 35% 65% Moderate 60% 40% Aggressive 80% 20% Attitude towards Asset Sustainability Depletion Maintain Value Appreciation Step 6 Step 7 Risk Tolerance
  62. Annuities Very limited options now Will pray for better options in future TILL THEN Actively manage on our own
  63. NPS DEFINED CONTRIBUTION SCHEME CURRENTLY promoted AGGRESSIVELY SWAVALAMBAN- Central Government puts in Rs-1,000 p.a in a/c with investment of 1,000 – 12,000/- p.a In Haryana & Karnataka - State government also puts in 1,000 p.a. Making it 2,000/- p.a
  64. Reverse Mortgage THE BEST BET FOR NO-GO PERSONS
  65. Income tax Investing in Tax efficient/Tax neutral instruments
  66. Medical Insurance Medical insurance covers- These policies provides for the medical expenses one is likely to make when there are medical emergencies/illness.
  67. Senior citizens job mela “Jobs 60+” a recent a senior citizen job fair held in Bangalore recently. It was attended by more than 1,000 senior citizens.
  68. IN JAPAN 10% of people caught stealing are above age of 65yrs
  69. Quotes Earnings:Never depend on a single source of income. Spending:If you buy things you don't need, you'll soon sell things you need. Savings:Don't save what is left after spending; Spend what is left after saving. Risk-taking:Never test the depth of the river with both feet. Investment:Don't put all your eggs in one basket.
  70. Thank You.. Retirement Planning- is a lifelong process - remember, it’s the early bird that gets the worm.
  71. Corpus needed
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