Thoughts on Retirement

Last Sunday I attended an investor training camp. There eminent speakers spoke about various topics relevant to investors.

One speaker(Mr P V Subramanyam, who runs Subramoney blog) talked about retirement.

That session was very informative and eye opening.

I want to share some points that came out in that session.

One has to plan carefully for retirement. It is not as easy as it appears to be. There are various inputs that are to be considered to crystalize the requirement.

1.      When is one planning to retire.

2.      What is the current corpus available.

3.      What are the likely inflation and returns one can expect.

4.      What is the length of post retirement life one is expecting to live.

5.      What are the current expenses and likely xpenses.

There are other points but considering the above major issues will help one understand the gravity of the issue. Now some explanation on these points is in order.

When is one planning to retire. It is very adventurous and rosy to consider early retirement. Say, when one is 45 or so. If one retires then, his age for which one has to survive on savings will be more to that extent. This is to be factored in. However, if one has plans to do something lucrative and not remains idle, it will soften the impact to some extent.

As life expectancy is increasing and the current life expectancy in India is >70 years, this is a major cause of joy and worry. Joy because one lives longer. Worry because one has to fend for so many more years on one’s corpus.

One thinks that post retirement one’s expenses tend to go down. This may not be universally true. If one has responsibilities and one retires at 50, his expenses tend to increase over time. Also post retirement one has more leisure time and one tends to do something which may cost one. Thus it is a good way to consider equal or slightly more expenses post retirement and that needs to be factored in while taking a decision.

The corpus available currently and liabilities one has, determines one’s cash flow. The higher corpus with less liabilities the better.  

Inflation and returns for an extended period are not tangible. So one can at best take an educated guess.

Thus the input as to how much one needs for retirement is not simple and  one needs to consider many factors to get a reasonable answer.

Based on the same argument, one needs to understand that one needs a big corpus for comfortable retirement and work towards meeting/achieving the same.

Trust this info is useful. Please share your ideas in comments.