1. One of the biggest challenges for today's young earners, who will be tomorrow's retirees, is to ensure that they don't outlive their savings.
2. This is a distinct possibility because of two factors: the rising cost of living due to persisting inflation and an increase in life expectancy due to faster medical advancement.
3. However, one's own retired life seems often not as crucial as children's education or marriage or their comfortable life.
4. This can be a problem because your retirement is going to be very different from your previous generation and you will also live longer, thus heightening the risk of outliving your money.
5. While you can even borrow for almost all other goals, no one will lend you for your retirement expenses, hence the need to build your retirement corpus during your own earning years, by starting as early as possible, as you will need to invest lesser per month for the same retirement corpus.
6. As a thumb rule, if you intend to retire at 60 years, you should accumulate a corpus equal to 25 times your estimated annual expenses after retirement, to propel you throughout your retired life.
7. Suppose you estimate your annual expenses after retirement to be 6 lakhs, your retirement corpus at the age of 60 should, therefore, be 1.5 crores.
8. Even when you are 35 years old, you can easily reach this retirement corpus through monthly SIPs of Rs.12,000 for 25 years in a Balanced equity fund (with even lesser SIP amount if you are younger, or in lesser time by keeping increasing SIP amounts over your earning years).
9. Whenever you achieve this corpus, you can easily keep withdrawing 4% (or even 5%) from it, i.e. Rs.50,000-60,000 monthly SWPs for meeting expenses during your entire retired life - while your corpus still continues to grow too - even if you stop SIPs after retirement.
10. This also means that you can continue to maintain your today's lifestyle during your retirement too - just with a disciplined SIP investment during your earning years.
11. After you are no more, your successors can also reap a bonanza from your corpus if you are able to continue nominal monthly SIPs (possibly out of your own monthly withdrawals surplus) during your entire lifetime without any break.
12. During your earning years, you can even opt for an ELSS fund, to avail additional Sec 80C tax benefits too, as your chosen fund for SIP investment.
13. The 4%-5% withdrawal rule was originally propounded with minimum annual returns of 7-8% and maximum inflation rate of 3%, and the mutual funds in your corpus should be in a position to maintain this differential at inflation rate every year, hence the investment in a Balanced equity fund (or an ELSS fund), or with a similar prerequisite if other funds are chosen.
14. If you have other sources of income, say monthly rental income, or already have some amount in your retirement corpus, say monthly pension, you can get by with investing lesser in this SIP fund during your earning years.
15. A back-of-the-envelope calculation also shows that you can accumulate 2 Crores retirement corpus through monthly SIPs of just 5,000 during your 30 years of working life and, after retirement, you can perpetually draw an inflation-beating monthly retirement income of 80,000 throughout your retired life, besides preserving your corpus for bequeathing to your near ones.
16. Actually, it's very simple for young earners to build their retirement corpus effortlessly.
17. Directly activate your monthly SIP for the beginning of the month from your salary account itself on a date nearby the salary date.
18. Keep the SIP amount as 5000, 8000 or 12000, if your age is 25, 30 or 35 years resp., till your age of 60.
19. Treat this SIP payment as your first monthly expense (akin to your annual term insurance premium) - and forget that this amount was ever a part of your take-home pay - come what may !
20. Proceed with your other monthly expenses only thereafter, without borrowing money from anyone.
2. This is a distinct possibility because of two factors: the rising cost of living due to persisting inflation and an increase in life expectancy due to faster medical advancement.
3. However, one's own retired life seems often not as crucial as children's education or marriage or their comfortable life.
4. This can be a problem because your retirement is going to be very different from your previous generation and you will also live longer, thus heightening the risk of outliving your money.
5. While you can even borrow for almost all other goals, no one will lend you for your retirement expenses, hence the need to build your retirement corpus during your own earning years, by starting as early as possible, as you will need to invest lesser per month for the same retirement corpus.
6. As a thumb rule, if you intend to retire at 60 years, you should accumulate a corpus equal to 25 times your estimated annual expenses after retirement, to propel you throughout your retired life.
7. Suppose you estimate your annual expenses after retirement to be 6 lakhs, your retirement corpus at the age of 60 should, therefore, be 1.5 crores.
8. Even when you are 35 years old, you can easily reach this retirement corpus through monthly SIPs of Rs.12,000 for 25 years in a Balanced equity fund (with even lesser SIP amount if you are younger, or in lesser time by keeping increasing SIP amounts over your earning years).
9. Whenever you achieve this corpus, you can easily keep withdrawing 4% (or even 5%) from it, i.e. Rs.50,000-60,000 monthly SWPs for meeting expenses during your entire retired life - while your corpus still continues to grow too - even if you stop SIPs after retirement.
10. This also means that you can continue to maintain your today's lifestyle during your retirement too - just with a disciplined SIP investment during your earning years.
11. After you are no more, your successors can also reap a bonanza from your corpus if you are able to continue nominal monthly SIPs (possibly out of your own monthly withdrawals surplus) during your entire lifetime without any break.
12. During your earning years, you can even opt for an ELSS fund, to avail additional Sec 80C tax benefits too, as your chosen fund for SIP investment.
13. The 4%-5% withdrawal rule was originally propounded with minimum annual returns of 7-8% and maximum inflation rate of 3%, and the mutual funds in your corpus should be in a position to maintain this differential at inflation rate every year, hence the investment in a Balanced equity fund (or an ELSS fund), or with a similar prerequisite if other funds are chosen.
14. If you have other sources of income, say monthly rental income, or already have some amount in your retirement corpus, say monthly pension, you can get by with investing lesser in this SIP fund during your earning years.
15. A back-of-the-envelope calculation also shows that you can accumulate 2 Crores retirement corpus through monthly SIPs of just 5,000 during your 30 years of working life and, after retirement, you can perpetually draw an inflation-beating monthly retirement income of 80,000 throughout your retired life, besides preserving your corpus for bequeathing to your near ones.
16. Actually, it's very simple for young earners to build their retirement corpus effortlessly.
17. Directly activate your monthly SIP for the beginning of the month from your salary account itself on a date nearby the salary date.
18. Keep the SIP amount as 5000, 8000 or 12000, if your age is 25, 30 or 35 years resp., till your age of 60.
19. Treat this SIP payment as your first monthly expense (akin to your annual term insurance premium) - and forget that this amount was ever a part of your take-home pay - come what may !
20. Proceed with your other monthly expenses only thereafter, without borrowing money from anyone.