Retirement Planning

Institute of Public Enterprise

 Why Retirement Planning?
 Longevity is increasing but not the retirement age
 Nuclear Family system is replacing Joint Family System
 Children are moving out and not living with parents
 Inflation rate is increasing
 Rising cost of medical services
 No social security system in India yet
 Life style and human needs are changing
 Working hours are increasing thereby seriously disturbing
work life balance and draining out energy in 15 to 20 years
of working life, forcing people to retire from active life
earlier (relatively younger age)
 Companies are more keen to employ younger persons and
offer VRS packages to employees above 40 / 45.
10 reasons to put off savings for
retirement
 There are so many important things I need that money
for now.
 There’ll always be time to save later
 May be I won’t live long enough to retire
 I love a challenge, let me see I will cross the bridge
when I need
 I don’t know how to begin
 The time value of money concept is very confusing
 I don’t know how much I need for retirement
 Planning for retirement is such a big job I dare not
 I might get lucky and get a lottery before I retire
 Taking care of me financially will provide wonderful
character-building opportunities for my children.
 Who Needs Retirement
Planning?
 Every one, a salaried person, a businessman, a
professional, an artist, even a housewife needs retirement
planning.
 In India most people live from hand to mouth and the
family burden is so high that few people get time and
opportunity to make retirement planning, that too, at
young age. But in today’s environment it is highly
essential.
How Much You need to save for
retirement?
 How Much You Need to Save Each Month
When calculating how much you have to save each month to reach the
target, there are many factors that come into play:
 Your current age.
 Intended retirement age. 
 Life expectancy.
 Current earnings.
 Income sources during retirement.
 Amount of current retirement savings.
 Expected savings contributions.
 Cash outflows during retirement.
 Portfolio risk/return.
 Inflation.
 Tips for Achieving Financial
Security
 Start as Soon as You Can
 Treat Your Savings as an Expense
 Save as Much as You Can in a Tax-Deferred Account
 Diversify Your Portfolio
 Consider All Your Potential Expenses in Your Financial Plan
 Budgeting for your savings and expenses
 Periodically Reassess Your Portfolio
 Reassess Your Expenses and Make Changes Where Possible
 Consider Your Spouse
 Work with an Experienced Financial Planner
 Look for a part time job or less taxing job
 If wife is younger, she can continue to serve as long as she
can , as salaries earned are to an extent inflation resistant
 Monthly savings to accumulate to
Rs.1,00,000.00
No. of years before Retirement Monthly Savings Required to
that you start saving Accumulate Rs.1,00,000 at 8%
interest

10 Rs.550

20 Rs.170

30 Rs.70

40 Rs.30
 Housing & Medical Needs after
Retirement
 Independent Living
 Assisted Living ( Old Age Homes)
 Nursing Homes
 Living in the same city where
Children live
 Moving to a Holy Place like Rishikesh
 Reverse Mortgage - Guidelines

Only house owners above the age of 60 are eligible.
 Maximum Loan is up to 60% of the value of the residential
property.
 Maximum period of reverse mortgage is for 15 years with a
Bank or a Housing Finance Company (HFC)
 The borrower can opt for a monthly, quarterly, annual or
lump sum payments at any point, as per his/her discretion.
 Revaluation of property has to be undertaken by the Bank /
HFC once in every 5 years.
 The amount received through reverse mortgage is
considered as loan and not income; hence the same will
not attract any tax liability.
 Reverse Mortgage- Guidelines
 Interest rate on reverse mortgage loan can be fixed or
floating .
 No repayment is envisaged during the life of the borrower.
The outstanding loan amount, therefore, would rise over
time.
 In most areas, where the property value appreciation is
good, the value of house would grow faster than the loan
balance, which would provide comfort to the lender.
 When the last borrower ( spouse) dies, or it is decided to
sell the house and move, the loan would become due. The
ownership of the house then would pass to estate or
directed by a living will or will to the beneficiaries.
 Reverse Mortgage- Guidelines
 The beneficiaries would have to either sell the house or
payoff the loan. If the house is sold then first the lender’s
dues are to be settled and the balance is to be kept by the
beneficiaries.
 If one of the spouse dies, the other can still continue to live
in that house. If both die, the lender bank would give the
heirs two options- either to settle the overall outstanding
and retain the house, or the bank itself will sell the house,
settle its dues and pay the balance to the heirs.
 For obvious reasons, it is expected that higher the age of
the borrower, more would be the annuity paid by the
lender.
 Currently most banks are providing loans maximum up to
Rs.50 Lakhs.