Whether you are going to be retired at the end of your long professional career or just wish to take voluntary retirement only to enjoy life and freedom from compulsory professional obligations, at the time of your retirement what you invariably require is financial security or a lump sum corpus of money that can take care of all your expenses for the rest of your life. Well, there are several annuity plans that can effectively help you make such a corpus and get monthly pension after your retirement. A prior and properly timed retirement planning is part and parcel of financial planning of a person.
But, when considering the accumulated corpus you require at the end of a term to ensure getting a monthly pension to meet expenses of that time, you need to take into account several aspects. How much money does one require in India to retire from work without any concern for the future expenses for the rest of his life? This is the question that continuously bugs people who considers taking positive steps for retirement. Can a corpus of 5 crores be enough to retire in India? First of all, without taking other aspects into consideration answering such a question in the point blank manner will not take you anywhere.
First consideration is inflationThe first and most important of all considerations concerning any future financial planning is about inflation. When it comes to retirement planning inflation is doubly important since the entire accumulated corpus not only has to beat the inflation until you retire but also has to stay afloat above the rate of inflation over the entire post retirement period or until the last day of your life. So, at the age of 40 if you start your annuity savings to build the corpus for the retirement after 20 years, the growth during all these years needs to beat the inflation of the rupee so that the annuity corpus really comes valuable when you retire. Even beating inflation during this period is not enough. You also need to consider the inflation of money during your post retirement days and so has to aim for much higher growth than just staying afloat above the rate of inflation.
Let us explain now how inflation eats away your savings and actually make your savings suffer. For example, in 1995 if you have projected 1 crore to be enough for meeting the expenses for the next 20 years, you have seen the fast deteriorating value of rupee and other currencies in the global scale which resulted in steadily decreasing purchasing power for money. So, the same medical expenses or regular home expenses now costs at least 10 times more down the line in less than two decades. If this is the rate of inflation that we have experienced in near past, it can be worse in the time to come and this is why we need retirement planning to stay solvent in the face of decreasing value for money. So, while earlier an 1 crore corpus just seemed enough for retirement, now even 5 crore seems not to hold much promise.
Medical expenses, a big consideration for post retirement days
The second most important consideration in relation to retirement planning is about the medical or healthcare expenses. It is a common knowledge that people in their old age become more vulnerable to severe health problems and complications requiring regular medical supervision, treatment and at times emergency health care. Obviously, increasing healthcare needs and medical supervision requires steady and continuous medical expenses and since you are no longer actively earning, your accumulated corpus and pension has to take care of these expenses. Now there is a hidden twist into this that many of us forget take into account. Healthcare cost is also subjected to inflation and consequent rise in expense. You need to pay for medical treatments and healthcare cost several times more after two decades than what they cost today. Naturally, your retirement planning should take the rising cost of medical expenses into consideration.
Solutions are unstable and future seems bleak
All of us after considering the havoc danger of getting our hard earned savings devalued by the mites of inflation, look for a stable solution that can protect our future financial planning from inflation and increasing cost of living. But the biggest irony is that most of the solutions claiming to beat the inflation rate are also not stable and there is no guarantee that they would be able to offer a positive growth over and above inflation just as they do today. While the scientific approach to stay growth proponent in fact if inflation is to earn more value for money, the inflation rate is volatile and dependent on many factors corresponding to economic scenarios. A massive economic crisis just can take a toll on the living cost and purchasing power of money that can lead to severe damage to your accumulated savings. While retirement planning aims to take this instability and volatility into consideration, you need to prepare for any contingency en route to your retirement corpus.
Retirement planning needs diversification
From the above mentioned analysis of various aspects of insecurity, instability and volatility concerning the value and purchasing power of money, we can conclude that your savings for retirement should take into account various situations. You just cannot afford to stay blind to growth while making your money secure. At the same time at times if urgent needs you need to make provision for liquid money. Achieving all these three aspects including, security, growth and liquidity through a solid and scrupulously laid out financial planning is the way to go. To build a solid and inflation beating retirement plan you need to plan for contingent and immediate situations as well. This is why it is advisable to invest in multiple instruments securing high overall growth over time while maintaining security and liquidity of money to a certain extent.
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