Do you plan for retirement

Central and State government generates revenue from common man through direct and and indirect taxes. The revenue so generated is utilized in public utility services like road infrastructure, Transport, Healthcare, Hospitals, Law Enforcement Agencies , Defence, Parliamentary affairs etc. How is the revenue earned spent by the government and whether it is spent in a fair and transparent manner is something that every common man who is paying taxes regularly and diligently has the right to know. It is the duty of the government to allocate part of the revenue generated by way of tax in rehabilitation of the aged and retired people. As the things stand now, the government does not have any scheme to help retired people.

In a scenario like this, it is very important for the young people to start building corpus amount for retirement at a very young age. Unfortunately, the young people are so busy in building the career that they hardly pay any attention to investing their savings intelligently until they reach the age of 50 years and beyond. Most of the professionals I have come across with invest their savings in bank fixed deposits which do not give more than 6-8% returns. Considering the rate of inflation which is about 10-12% ( not an official estimate but based on price index of essential commodities), the rate of interest offered by banks is far less than rate of inflation and is therefore not a viable option. Investing in stock gives much higher returns but is highly risky. One has to consider options which give higher returns and at the same time, the risk is minimum. One has to plan how much corpus amount is required at the time of retirement so as to survive the retirement life which is approx 25 years. To give you an example, if a couple in a city like Mumbai requires on an average Rs 15,000 per month to survive as of now and considering rate of inflation as 10% per annum which is bare minimum and assuming the average age of the couple as 25 years, the minimum amount required to survive at the age of retirement is going to be approx Rs 1 Lac per month. Considering the retirement age as 25 years, the corpus amount required at the time of retirement is estimated to be Rs 3 crores. That means your savings should be minimum Re 15,000 per month and must be invested in such a way so as to enable it to grow sufficiently to reach this amount at the time of retirement. Where to invest the savings and how to invest depends on several factors that must be kept in mind. Investment in mutual fund according to me is a good option. My experience is that it gives you on an average between 15 to 20% return per annum. Money invested in mutual fund is ultimately invested in stock for higher returns but you are not exposed to risk as there are fund managers who will take care of your investments. Another area which is neglected is proper tax planning. If you are in the higher income bracket say above Rs 5 Lacs per annum, you pay 30% tax on your earnings which is a sizeable amount. The government gives deductions under section 80 C to the extent of Rs 1 Lac. If you do not avail of this deduction, you land up paying higher taxes which ultimately will deplete your savings.

I will conclude by saying that retirement enevitable. It is going to come to you one day whether you like it or not. The earlier you start planning for it, the better else it will be too late.