Investment Plans For Retirement - Rs 1 Crore Enough To Retire - Here Are 3 Investment Plans To Make Savings Last During Retirement

9/12/2019 Investment Plans for retirement: Rs 1 crore enough to retire?
rore enough to retire? Here are 3 investment plans to make savings last during retirement
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Is Rs 1 crore enough to retire? Here are 3

investment plans to make savings last
during retirement
On the face of it, a nest egg of Rs 1 crore appears big enough to sustain a retiree’s
expenses for life.
By Babar Zaidi, ET Bureau | Updated: Sep 10, 2019, 10.04 AM IST Save
27
Comments
Getty Images
One of the biggest challenges that retirees
face is how to make their retirement savings
last a lifetime. Even if one has saved IN THE SPOTLIGHT
diligently throughout one’s working life and Leave a tax free legacy for your
children with whole life insurance
accumulated a sizeable nest egg, it may not
plans
be able to generate enough to sustain
monthly expenses over the long term. This is
mainly due to three factors: longer life spans, Related Most Read Most Shared
early retirement and falling interest rates.
Retirement planning: How much will you need to
retire?
According to a report of the UN Population
After a few years, investor can gradually start shifting
Jack Ma officially retires as Alibaba's chairman
the equity portion to the safety of debt. Fund, life expectancy at birth in India has
risen from 60 years in 1994 to 69 years in All CAPF personnel to retire at 60 now
2019. That’s the average. Lifespans are longer in urban centres with medical facilities and Tearful Serena retires injured in Toronto final
among socio-economic classes that can access them. It is not uncommon to see people in
How to make your retirement money last
their 80s and 90s, and things will only get better in future. As a result, the average upper
middle-class urban retiree must have enough to last 20-25 years in retirement instead of
15-20 years earlier. At the same time, it is now common for people to leave full-time Discover POWERED BY
employment while in their early fifties. This means they have fewer years to accumulate Mutual Funds
their nest egg and more years to spend it.
All this is happening at a time when interest rates of fixed income options have come down
and the investment landscape has changed drastically. Fixed deposits are offering senior Top Tax Saver ELSS SIP starting Rs 500
citizens around 7% returns. The Senior Citizens’ Saving Scheme, the most lucrative option Funds
for retirees in the small savings stable, currently offers 8.6% but this could soon change.
Small savings rates are linked to government bond yields and are reset every three
months. With the 10-year bond yield falling sharply to 6.5% in the past three months, the
Alternative to Index Funds
government is likely to cut the rates on small savings schemes in the next revision
Savings Account
scheduled in October. Analysts say this will allow banks to cut their deposit rates. Banks
want to bring down their cost of borrowing but can’t cut deposit rates due to competition
fromIs small
Rs 1 crore enough to retire? Here
savings. Consequences of financially supporting
1 are 3 investment plans to make savings 2 How to start an emergency fund while
paying your education loan
3 Financial lessons from 7 celebrity
millionaires who lost a fortune
4 your adult child and 3 ways to stop
last during retirement doing it
https://economictimes.indiatimes.com/wealth/plan/is-rs-1-crore-enough-to-retire-here-are-3-investment-plans-to-make-savings-last-during-retirement/… 1/18
9/12/2019 Investment Plans for retirement: Rs 1 crore enough to retire? Here are 3 investment plans to make savings last during retirement
This week’s cover story looks at the investment strategies followed by retirees to earn a Best Large Cap Best Balanced
monthly income in retirement. We have identified three options: the traditional approach Funds Funds
that relies solely on fixed income options, a moderate approach that takes a little risk and
the bucket strategy that financial planners suggest. Read on to know how the three
strategies use a corpus of Rs 1 crore to generate monthly income in retirement.
High Performing Mid Top Rated Multi Cap

Is Rs 1 crore enough? Cap Funds Funds
On the face of it, a nest egg of Rs 1 crore appears big enough to sustain a retiree’s
expenses for life. If put into an annuity plan when the individual is 60 years old, the corpus
can yield a monthly pension of about Rs 70,000 for life. But this option will not give the
principal back to the legal heirs of the investor on his death. If he wants his legal heirs to
FUTURE OF WORK
get back the principal amount of Rs 1 crore, he will have to settle for a lower income of
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Inflation pushes up your expenses with each passing day. Even a moderate inflation rate INSURANCE
of 6% per annum will take the monthly expense to Rs 90,000 a month in 10 years and to India is slowly
Rs 1.6 lakh in 20 years (see graphic). In other words, in 20 years, the pension from the warming up to cyber
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annuity will be able to purchase barely a third of what it can purchase today. Somebody
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The ultra-safe conservative retirement plan (see graphic) relies solely on income from
annuity and fixed income options that give assured returns. While it is safe from the Wealth Plan Trending Terms
volatility of the bond market and the vagaries of the stock market, it will not be able to
Millennial Financial Planning Financial Goals
match the incessant march of inflation. 13 personal finance thumb rules Financial Literacy
Home Loan Money Management Mutual Fund
ULTRA-SAFE CONSERVATIVE PLAN Atal Pension Yojana for tax benefits Financial Planning
Relies on annuity income and fixed income options that give assured returns Atal Pension Yojana Consumer Complaint Online
Benefits for Senior Citizens Money Tips
Investment break-up
What’s good about this

Is Rs 1 crore enough
Investments to retire? risk
are almost Here free and returns are assured. Consequences of financially supporting
1 are 3 investment plans to make savings 2 How to start an emergency fund while
Income
last duringwill not fluctuate due to interest
retirement rate changes or stock market volatility doing it
What’s not so good

Interest rates are not forever. If rates are lower when investments mature, they will be
reinvested at prevailing rate to earn less.
Inflation not taken into account. If investor needs Rs 50,000 a month in 2019, he will
need around Rs 67,000 a month in 2024 and almost Rs 90,000 a month in 2029.
These are pre-tax returns. Tax will further reduce the income.
What the investor can do

For the first six years, the investment will generate surplus income which can be
reinvested. After the sixth year, investor can start liquidating some fixed deposits every
month to bridge shortfall in income and expenses.
MODERATE PLAN WITH SOME RISKS

Uses a mix of market-linked and fixed income options with a dash of equity
Investment break-up
What’s good about this

Returns not assured but risk is low. Mix of debt funds and fixed deposits cancel out the
risks.
Equity portion left untouched has potential to earn higher returns.
Portfolio is more tax efficient than the ultra safe portfolio.
Income can be customised by increasing the monthly withdrawal to account for inflation.
What’s not so good

Interest income is fully taxable. Tax can eat into the returns.
Element of risk in the equity portion as also debt funds. Must choose schemes carefully.
Requires some basic knowledge of mutual funds and how they function.
What the investor can do

After a few years, investor can gradually start shifting the equity portion to the safety of
debt.
What retirees can do

Mutual fund houses, stock analysts and financial planners don’t tire of telling us that
equities have the potential to give the highest returns among all asset classes. But as we
have seen in the past few months, equities bought at the wrong time and at the wrong
price also have the potential to churn out the biggest losses. For a retiree who depends
solely from income from his investments, even a small loss can be quite disconcerting.
Even so, retirees do need a dash of equities in their portfolios to help them stay ahead of
Is Rs 1 They
inflation. crore enough to retire?
also need toHere
invest in markettolinked Consequences of financially supporting
start aninstruments
emergency fundthat
whileare more tax efficient
1 are 3 investment plans to make savings 2 How paying your education loan
thanlast
fixed
duringdeposits
retirementand small savings schemes. Pension income and interest from bank doing it
deposits is fully taxable. Senior citizens enjoy a Rs 50,000 exemption on interest income
but anything beyond that is taxed at the normal rates.
The Moderate portfolio uses debt funds to earn tax efficient returns. Gains from debt funds
are taxed at a lower rate of 20 percent with indexation benefit if held for more than three
years. Since withdrawals are mix of the principal and the gain, the effective tax on the
withdrawn amount is very low. The Moderate portfolio has also allocated 10 percent to
equity funds to generate higher returns. But while this corpus can last longer than the pure
debt-based traditional portfolio, it may not sustain for 25 years.
The three-bucket approach

Splits the corpus into three portions for the short, medium and long term.
The balance Rs 50 lakh is put into three buckets.
Is Rs 1 crore enough to retire? Here Consequences of financially supporting

How to start an emergency fund while Financial lessons from 7 celebrity
1 are 3 investment plans to make savings 2 paying your education loan
3 millionaires who lost a fortune
The bucket strategy helps segregate long term investments from the money meant for
immediate use. However, the investor needs to be fully committed to follow this approach.
If he panics when stock markets tumble and withdraws his equity funds, the whole purpose
of the strategy will be defeated.
Three-bucket approach
A more sophisticated strategy is to split the corpus into three buckets. The first bucket is
for immediate use and relies on a liquid fund. The second bucket is for the medium term
(6-12 years) and uses equity-oriented hybrid funds. The money in the third bucket is for the
long term (over 12 years) and gets invested in equity funds.
Experts say the bucket strategy helps segregate long-term investments from the money
meant for immediate use. However, the investor needs to be fully committed to follow this
approach. If he panics when stock markets tumble and his equity funds decline, the whole
purpose of the strategy will be defeated.
Not making enough money in stocks? Click here for real-life stories of successful
investors.
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1 At the time of resale, it ensures credibility of purity of the coin
0 2 It prevents the coin from getting spoiled
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How to start an emergency fund while

paying your education loan IN THE SPOTLIGHT
Leave a tax free legacy for your
To create surplus savings, you must avoid taking on any bad debt and clear your existing children with whole life insurance
bad debt. plans
By Navneet Dubey, ET Online | Updated: Sep 10, 2019, 11.02 PM IST
0 Related Most Read Most Shared

Comments
Getty Images Education loans in India shrink 25% in 4 yrs

Mostly, students start repaying their
education loans with the start of their Why getting education loan has become tougher
now
working lives. And for many paying for
monthly discretionary expenses and the loan Education loan: The government's Vidyalakshmi
website will help you get one
equated monthly instalments (EMIs) can be
financially stressful. Though it might be How to fund child's studies? Education loan better
than mortgaging house, using savings
difficult, it is financially prudent to salt away a
portion of your income towards creating an Bank vs NBFC: Keep these factors in mind while
taking an education loan
emergency fund.
An emergency fund helps you meet your daily

Now, at the start of your career, your Discover POWERED BY
expenditure in case of unforeseen eventualities. education loan EMIs may make your savings Mutual Funds
difficult but later on, as your income
increases, it will become easier to set aside funds for emergency purposes.
Why do you need to maintain an emergency fund?

Top Tax Saver ELSS SIP starting Rs 500
An emergency fund helps you meet your daily expenditure in case of unforeseen Funds
eventualities. For instance, what happens if you were to suddenly lose your job? In such a
case, your salary will stop but your monthly expenses and EMIs will not. Financial stress
can become a threat to your mental and physical health during a job loss. Although, a long
period of unemployment is less likely to happen, but finding a new job also takes time.
Therefore, it is important for you to have an emergency fund large enough to meet your Alternative to Index Funds
Savings Account
expenses comfortably in such situations.
How to save money for creating an emergency fund

To create surplus savings, you must avoid taking on any bad debt and clear your existing
bad debt, such as credit card debt and personal loans, if any. This way the interest paid
Best Large Cap Best Balanced
towards bad debt can be saved for creating the emergency fund. Funds Funds
Conservative people can save money in their savings bank account and maintain surplus
balance for emergency needs. Amol Joshi, Founder, Plan Rupee Investment Services
says, the
Is Rs biggest
1 crore advantage
enough of maintaining
to retire? Here anstart
How to emergency fund
an emergency fund in a bank savings
while Financialaccount
lessons from 7 celebrity
Consequences of financially supporting
1 are 3 investment plans to make savings 2 paying your education loan 3 millionaires who lost a fortune
High 4 Mid
Performing your adult child and 3 ways to stop
Top Rated Multi Cap
is: last during retirement doing it
Cap Funds Funds
Cap Funds Funds
Easy access to funds via a debit card;
Secure feeling of having money readily available (because it reflects as account
balance).
Reach out to Top Generator Dealers near you
and get free quotes
However, make sure you don't put too much of your 'emergency fund' money in a savings
GET QUOTE
bank account as the return earned on the deposit is low. Joshi said while the interest rate
is low (around 4 percent or even less), you should save money in a savings bank account
only if the above two comforts are more important for you.
Wealth Plan Trending Terms
He further said, "Many liquid mutual fund schemes come with the facilities like debit card Millennial Financial Planning Financial Goals
(easy access to funds) and easy balance checking facility via mobile apps. Moreover, 13 personal finance thumb rules Financial Literacy
return on liquid mutual funds is most likely to beat the savings account interest rate. So, if Home Loan Money Management Mutual Fund
you can make this behavioural change, then gradually switch to liquid funds." Atal Pension Yojana for tax benefits Financial Planning
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Abhinav Angirish, Founder, Investonline.in said, "Instead of putting emergency funds in a Benefits for Senior Citizens Money Tips
savings bank account, you can opt for a liquid mutual fund or recurring deposits. You can
expect to get better return on money deposited in a liquid mutual fund or recurring deposits
as compared to a savings bank account."
According to financial experts, liquid mutual funds return, and recurring deposit interest
rate are most likely to beat the savings account interest rate.
Angirish said, "Investing in the recurring deposit can earn around 6-7 percent return per
annum. On the other hand, liquid mutual funds can earn around 8 to 9 percent return per
annum on your emergency fund. However, remember return on liquid mutual funds are
market-driven. However, while selling units in liquid mutual funds no exit load is applied."
Here's how to save emergency fund while paying education loan:
1. Save according to suitability:

Most experts say while focusing on repaying your education loan or other debts, you
should ideally set aside small savings from your monthly income to create an emergency
fund till you make a buffer amount equal to 3-6 months' expenses (which should include
the cost of education loan EMIs). You may save this money either in the beginning or end
of the month, as per your suitability.
C.S.Sudheer, CEO and Founder of IndianMoney.com said, "You should ideally set aside a
minimum amount, say around 10 percent of your monthly income in the emergency fund at
the beginning of the month. However, you may also save at the end of the month but in
such case, you need to carefully manage your living expenses so that you can at least set
aside a few thousand rupees or at least 10 percent of your income at the end of the
month."
He said, "While paying the education loan EMIs in time, if you earn/save any extra amount
during the course of time then that amount should be used in building an emergency fund
which equals to 3-6 months' living expenses."
This is the simplest way and should be doable without straining your finances. However,
the first year may be the toughest, but it will eventually be the most rewarding. This is
because even if your savings are small, they provide you with the base for accelerated
growth in later years.
Secondly, as your income rises, your ability to save money should also increase.
Is Rs 1 crore
Therefore, as enough
you getto retire?
past Here
the first couple Consequences of financially supporting
Howof
to years
start an of working,
emergency fundthen
whileyou must also start
Financial tofrom 7 celebrity
lessons
1 are 3 investment plans to make savings 2 paying your education loan 3 millionaires who lost a fortune 4 your adult child and 3 ways to stop
accelerate
last duringthe pace of your emergency fund creation. Adhil Shetty, CEO, BankBazaar.com
retirement doing it
said, "You should gradually push up your savings rate to 15-20 percent from 10-15 percent
of your monthly income over a period of time. By all means, save a higher percentage -25-
30 percent - if you can." He said, "Keep saving through this method until you've saved at
least 3-6 months' worth your current living expenses. It would be even better if you save 3-
6 months' worth your current income."
After you have saved an amount equal to three-six months' worth of expenses you can
either stop saving towards the emergency fund or keep saving until you have made a
buffer amount equal to 6-12 months' current expense.
2. Save during the moratorium period:

After you complete your education, lenders give a relaxation of about one-year time to start
re-paying education loan. This is called the moratorium period.
Gaurav Gupta, Founder & CEO, MyLoanCare said that student applicants avail education
loan to pursue their higher education during the course of which the applicant is not
earning and hence, they are not in a position to repay the loan. Hence, most banks offer a
moratorium period for repayment of education loan in which a borrower has to start paying
EMIs 12 months after the completion of the course or six months after securing a job,
whichever is earlier."
The repayment tenure after moratorium period generally ranges from 5 to 7 years. "Banks
give the option of paying only the monthly interest during the moratorium period or paying
the entire amount in EMIs only when repayment commences after the moratorium period,"
Gupta added.
Therefore, as you soon as you start your job, first create an emergency fund by saving
money during the moratorium period. After that, begin your EMI payments towards the
education loan. Once you start paying EMIs, make sure you don't skip any of your
education loan EMI payment during the tenure.
Sudheer said, "Your credit score is impacted if education loan EMIs are not repaid in time.
A sudden job loss could delay EMI repayments and impact the credit score. So, in case of
financial emergency, maintaining a buffer amount of at least 3 months can help you
continue paying your EMIs and prevent your credit score from getting adversely impacted."
As you may not get enough income to tackle both EMI payments and creating an
emergency fund simultaneously, following this approach can reduce your financial burden
to an extent during initial working years.
The following is another way you can simultaneously save for an emergency fund and pay
your EMIs.
3. Tax-savings approach:
The money you save through tax can be used for emergency fund creation. You must
know that the interest paid on the education loan provides you tax-saving deduction under
section 80E of the Income Tax Act, for the first 8 years. Hence, you can put the tax saved
in this way into your emergency fund.
Points to note
If you don't have or have an inadequate emergency fund, you risk becoming more
indebted because you would have to borrow to meet living expenses in case you lose
your job. Therefore, you must review your emergency fund from time to time. The
reviewing process should be done in accordance with the increase in monthly
expenses.
1 You shouldn't stop maintaining an2emergency
are 3 investment plans to make savings
fund after
paying your education
3 millionaires
loancompletely repaying yourwho lost a fortune 4 your adult child and 3 ways to stop
education loan Make sure you have created an emergency fund for meeting daily
education loan. Make sure you have created an emergency fund for meeting daily
expenses which include money spent on food, rent, utility bills and other financial goals.
If you have a steady job and have saved enough to meet your 6 to 12 months current
expenses, then prepay the education loan and save on the interest you would have had
to pay on the balance loan.
investors.
0
Comments
Read more on Emi Income Saving Student Education Loan
Emergency Fund Debt
Also Read
Education loans in India shrink 25% in 4 yrs
Why getting education loan has become tougher now
Education loan: The government's Vidyalakshmi website will help you get one
How to fund child's studies? Education loan better than mortgaging house, using savings
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millionaires who lost a fortune IN THE SPOTLIGHT
Amitabh Bachchan, Boris Becker, Nicolas Cage, Mike Tyson -- they all went bankrupt. children with whole life insurance
Here are money lessons you can learn from celebrities who lost a fortune. plans
By Riju Mehta, ET Bureau | Updated: Sep 09, 2019, 11.01 AM IST
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Getty Images Is Rs 1 crore enough to retire? Here are 3

Find out where you could go wrong in investment plans to make savings last during
preserving your wealth by learning from the retirement
millionaires who lost and, in some cases, ITR processed? Here's how to request intimation
1 are 3 investment plans to make savings 2 recovered
How to start it. fund while
an emergency
3 notice u/s 143(1)
Financial lessons from 7 celebrity
paying your education loan millionaires who lost a fortune
How to start an emergency fund while paying your
How to start an emergency fund while paying your
Amitabh Bachchan, Actor education loan
SBI cuts MCLR and fixed deposit rates across all

tenors
PSU bank mergers: Is it actually good news for

shareholders?
Don’t fund projects with notional money, or without an More »

emergency corpus in hand.
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Is Rs 1 crore enough to retire? Here Mutual Funds

are 3 investment plans to make
savings last during retirement

Funds

Savings Account

Funds Funds

Cap Funds Funds
Source of wealth: Films, TV shows, endorsements Reach out to Top Generator Dealers near you
and get free quotes
The highs: In 1999, he had a net worth of Rs 60.52 crore, while his current net worth
(after recovering from bankruptcy) is Rs 2,866 crore. GET QUOTE
The lows: At 57, his company, Amitabh Bachchan Corporation Ltd, ran up losses of
nearly Rs 90 crore. He had no films or money, had legal cases, and a tax recovery
notice on his house. Wealth Plan Trending Terms
Reasons for fall: ABCL took on more than it could handle, like the Miss World pageant,
and exhausted all money. Then it took bank loans which it couldn't repay. Bachchan had 13 personal finance thumb rules Financial Literacy
retired, so there was no income, and no savings. Home Loan Money Management Mutual Fund
Atal Pension Yojana for tax benefits Financial Planning
Financial lessons Atal Pension Yojana Consumer Complaint Online
Don’t launch a startup without adequate research and expertise. Benefits for Senior Citizens Money Tips
Don’t take risks in retirement or dip into the retirement kitty.

Don’t fund projects with notional money, or without an emergency corpus in hand.
Boris Becker, Tennis Player

https://economictimes.indiatimes.com/wealth/plan/is-rs-1-crore-enough-to-retire-here-are-3-investment-plans-to-make-savings-last-during-retiremen… 10/18
Source of wealth: Tennis/poker prize money, endorsements, sponsorships, earnings

from a best-seller book.
The highs: Former World No. 1 and youngest player to win Wimbledon at 17, the
German ranks among the Top 10 highest earners in tennis, and had a net worth of Rs
1,400 crore.
The lows: In 2017, he went bankrupt. In 2019, he was forced to auction 82 trophies &
personal souvenirs. He reportedly owed nearly Rs 617 crore in debt, and in 2001, he
had owed Rs 50 crore in back taxes in Germany.
Reasons for fall: He reinvented himself as commentator, coach and poker player, but
high spending, and unpaid loans and taxes took their toll.
Financial lessons
Loans don’t go away if you keep ignoring them. They become bigger as interest keeps
adding up. Repay at the earliest.
Don’t spend more than you earn. It doesn’t matter whether you earn in crores. If your
outgo exceeds your income, the money will not last very long.
Vijay Mallya, Business Tycoon
Source of wealth: Conglomerate of over 60 firms under UB Group.

The highs: The 'King of Good Times' and chairman of the United Breweries Group had
aIsnet
Rs 1worth of nearly
crore enough Rs Here
to retire? 11,500 crore in 2007. Consequences of financially supporting
1 The
are 3 investment plans to make savings
lows: In 2016, he left India on 2 the dayyour
paying that 17 public
education
3 millionaires
loan sector banks moved thewho
Debt
lost a fortune
R T ib lt ti R 9 000 h d th H l f h f
https://economictimes.indiatimes.com/wealth/plan/is-rs-1-crore-enough-to-retire-here-are-3-investment-plans-to-make-savings-last-during-retirement… 11/18
Recovery Tribunal to retrieve Rs 9,000 crore he owed them. He also faces charges of
fraud and money laundering.
Reasons for fall: Kingfisher Airlines, launched in 2005 and grounded in 2012, kept
piling losses. Mallya defaulted on loans taken to keep it afloat. He also continued to
maintain his lavish, extravagant lifestyle.
Financial lessons
Don't get emotionally attached to a loss-making investment. Cut the losses to safeguard
your portfolio.
Don't take loans if you are unsure of your financial ability to repay.
Nicolas Cage, Actor
Source of wealth: Films

The highs: One of the top earners in Hollywood, at one time, he was worth Rs 1,075
crore. He owned 15 residences across the world, besides several luxury cars and rare
artefacts.
The lows: In 2009, he was forced topay back taxes worth Rs 100 crore, for which he
had to sell some of his properties.
Reasons for fall: Lavish lifestyle with bizarre and extravagant purchases like a
dinosaur skull, pygmy heads, an island, and castles. Poor investment choices and
wrong money managers were also to blame for his fall.
Financial lessons
Even if you are earning astronomical sums, you need to invest it so that it keeps
growing.
It is essential to choose your fi nancial adviser and wealth manager carefully.
Eike Batista, Entrepreneur

Source of wealth: Equity holdings in EBX Group, and in oil, gas, logistics, mining.
The highs: In 2012, he was the richest man in Brazil and seventh richest in the world,
with a fortune of around Rs 2.5 lakh crore.
The lows: Today, at 60, Batista’s net worth is in the negative, with Rs 8,600 crore in
debt, one of the biggest falls in fortune of a billionaire. He was also given a 30-year
prison sentence for bribery.
Reasons for fall: His firms overstated oil and gas reserves earnings, even as operating
and profit targets were missed. When oil reserves dipped and mineral prices crashed,
his companies’ stock prices fell over 99% and the oil company OGX went bankrupt.
Financial lessons
In business or as an employee in a salaried job, don’t promise more than you can deliver.
You will lose credibility, and with it, your job and money.
Mike Tyson, Boxer
Source of wealth: Boxing prize money. Later, fi lms, TV shows, books.

The highs: World heavyweight boxing champion at 20, his career earnings were Rs
4,910 crore. After his fall, he rose with TV shows, films and books. His current worth is
1 Rs
are 21 crore. plans to make savings 2 How to start an emergency fund while Financial lessons from 7 celebrity
3 investment
paying your education loan 3 millionaires who lost a fortune 4 your adult child and 3 ways to stop
last during retirement
The lows: In 2003, he filed for bankruptcy with Rs 193 crore debt to the IRS, divorce doing it
, p y ,
lawyers, and an ex-wife.
Reasons for fall: He led a lavish lifestyle and spent excessively on 110 luxury cars,
several mansions, and exotic pets like tigers, squandering Rs 2,500-2,870 crore. Later,
alcohol and drug addiction, court cases and convictions ruined his career.
Financial lessons
Avoid addictions, be it alcohol, drugs, smoking or gambling. It will eat into your wealth
and ruin your career.
Keep track of your investments even if someone else is managing it for you.
Remember, it is your money.
A.K. Hangal, Actor
Source of wealth: Films

The highs: From 1966 to 2005, the character artist featured in 225 Hindi films, like
Sholay and Bawarchi. Though his net worth is not known, he was fiancially secure.
The lows: After 2007, he found it difficult to get any roles due to old age and medical
problems. By 2011, he couldn't even pay his medical bills and the film fraternity came
forward to help him. He expired in 2012 at the age of 98, in extreme poverty.
Reasons for fall: Since he lived till the age of 98, his kitty could not sustain him in
retirement. No source of income and medical problems exacerbated the problem.
Financial lessons
Your retirement kitty should be large enough to last 20-25 years after you quit work.
Invest your retirement corpus so that it can beat inflation and grow sufficiently in
retirement.
investors.
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your adult child and 3 ways to stop doing it IN THE SPOTLIGHT
Financially supporting a grown-up child while imperilling one’s future is not wise. children with whole life insurance
plans
ET CONTRIBUTORS | Sep 09, 2019, 06.30 AM IST
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By Uma Shashikant
More attentive and adaptive: Here's why kids are
better learners than adults
My friend’s son has returned home after a 2-
Kill stress with Snapchat: Social media may lower
year stint in Bengaluru. He wants to recover depression risk in adults
from another failed attempt to establish his
This unsalted juice can lower blood pressure and
career. He is 34. They will now house, feed cholesterol level in adults
and care for him and hope their only child
Narayana Murthy's Teachers' Day advice to young
will find a job he can keep. The family adults: Ask questions, train yourself
finances are already precarious, but my
Hygiene products like sanitary napkins,
friend has signed up for another part-time job disinfectants and adult diapers could soon come
she will do after office hours. How do parents under price control
wean their adult kids off this cruel financial dependence?
It is not uncommon in India for adult children to live with parents. There is both
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Mutual Funds
convenience and complaint about the practice. Research has established this pattern all
over the world, including in the West, where ruthless independence at the age of 18 was
the norm. There is enough evidence of substantial parental support to adult children even
in these societies. My friend would be called an enabler of a boomerang adult child.
Funds
Enabling comes in various forms. Parents may pay off education loans of grown-up
children; fund an international holiday or an expensive birthday party; take on payment of
bills, EMIs and insurance; bail out credit card dues and defaulted loans; volunteer down
payment for the house or car; offer a monthly allowance; or subsidise health costs.
What drives parents to continue to support adult children who should be responsible for Savings Account
their own lives? Growing up is about making choices and facing the consequences of
those choices.
Is Rs By offering
1 crore enough to retire?to “help”, parentstoactively
Here impede fund
theirwhile
adult children from being Consequences of financially supporting
1 are 3 investment plans to make savings 2 How start an emergency
responsible for their own actions.

There can be serious consequences.
Funds Funds
Parents could be jeopardising their finances by enabling adult children. They may be
putting their health and retirement at risk; liquidating their assets at unfair valuations;
unevenly dividing their wealth or compromising on goals. My friend should not be working
two jobs when she is nearing retirement.
Cap Funds Funds
Sociologists point to the “child-centric” family structures that have evolved in modern
society that psyche parents into believing they exist for the well-being of their children and
therefore, have do what it takes. If the early primitive societies were driven by the basic Reach out to Top Generator Dealers near you
and get free quotes
instinct to reproduce and further the species, the modern society has made having a child
a completely emotion-driven deliberate decision that hinges on the need to create a GET QUOTE
cohesive family unit; the craving for being loved, needed and validated; the compulsions of
succeeding and doing better than one’s cohorts; and the burden it places on parents to
hold themselves responsible for their child’s success, happiness and progress in life. Wealth Plan Trending Terms
This obsession has triggered a generation of helicopter parents who have to know and
13 personal finance thumb rules Financial Literacy
solve every one of their children’s problems, shielding them from the adverse
Home Loan Money Management Mutual Fund
consequences all their lives. Even if these arose from conscious choices the adult child Atal Pension Yojana for tax benefits Financial Planning
willingly made. Atal Pension Yojana Consumer Complaint Online
Benefits for Senior Citizens Money Tips
There are versions of enabling parents and children. There are those who so smother with
gifts, grants and cash that the children stay reckless all their lives. Think about politicians
and business people who accumulate wealth for many future generations. There are
children who do not take their adult lives seriously, making careless choices, blaming
everyone but themselves for their situation. There are schemers who know which button to
push to get the parent to fund their next big expense, while they themselves continue to
spend on indulgences. There are the entitled who wouldn’t care much about badgering
and threatening the parent for money.
While we can argue that both sides are to blame, we can agree it is tough to see merit in
this system of extended subsidy. What can parents and children do to keep the financial
transactions sane and sensible?
First, make sure there is a rule-based system that clarifies the basics. In many Indian
homes where the adult child and his family lives with the parents, there is a pooled account
for household expenses into which everyone contributes. There is a clear understanding
about who will do what, and who will spend for what. In exchange for the saving on rent,
and the possible inheritance of the property, children take care of the parents well into their
old age. Not all arrangements are firm; but the broad rules are set.
Research shows financial support that is finite, measured and clearly defined is less
burdensome on the provider. We advised our friend to ask the son to live independently on
a fixed monthly allowance for a fixed time, within which time he had to find work. Keep help
specific and small. Do not get into arrangements that are tough to discontinue. Involve a
trustworthy third party if needed.
Second, recognise your emotional limitations and psychological responses to your child’s
demands. It is important for both parents to agree that they need to limit their support.
Many parents choose to live separately from their children, but their being needy of
acceptance and attention leads to financing their children and remaining unwilling to say
no. Children learn which button to push. Parents relent egged by varying emotions of fear,
hope, guilt,
Is Rs remorse
1 crore enough toand threat
retire? Here to the demands of unreasonable children.
Third, reinforce the power you wield on your assets and money. It is what you have earned
in your lifetime, and you have the right to spend it in a manner you see fit. You may want to
give it away in charity; you may want to create a fund for your grandchildren’s future rather
than let your children spend it; you may need it for your own retirement and use; and you
have to express these needs without hesitation, so you can prioritise how to use your
money.
A piece of sane advice someone gave my friend: When an adult child asks for a favour,
from babysitting their child to asking to boomerang back, the standard answer should be:
“let me think about it and come back to you.” Do not force yourself to agree immediately.
Buying time will reduce the burden and provide the space to say no if you have to.
(The writer is Chairperson, Centre for Investment Education and Learning.)

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here
do not reflect the views of www.economictimes.com.)
investors.
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Financial Planning Adult Substance Dependence
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More attentive and adaptive: Here's why kids are better learners than adults
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