Have you done your
Retirement Planning?
Whenever I ask this question to any of my friends or investors,
the answer I get in negative most of them ask me what is need for me to do
retirement planning. Article about retirement planning has been written before
in my blog but I am going to write it again. I want to tell here importance of
retirement planning through a story which I have read few days back in some
news letter. It is the conversation among 4 retired person which I am going to
share with you.
“Look Who’s here!! Mr. Desai, Good to see you.” said Mr. Suren
Mehta, a retired banker. He was sitting with few other friends, Mr. Ajit Khanna
and Mr. Rajat Ghosh in a park as their daily routine in retirement days. He
suddenly saw Mr. Srikant Desai, a retired professional coming towards them,
when he said this.
“Good to see you all too.” Said Mr. Desai.
“Let me introduce you all to my friends, Srikant Desai. He is
the happiest retired person I have ever met. He exercises, spend time with his
grandchildren, goes on vacation with family and enjoys his retirement to the
fullest.” Said Mr. Mehta to Mr. Khanna and Mr. ghosh.
“You are a lucky man” said Mr. Khanna. “I have two daughters. I
took loan against my PF and LIC policies and got married them with great
fashion. Now, I am left with meager amount to fund my retirement. I wish, I had
a son who could fund my retirement.”
“Not really” said Mr. Ghosh. “I have 2 sons. But none of them
gives me enough money to enjoy life like Mr. Desai and the annuity I earn from
my policies, is hardly enough to survive. I can’t even dream such luxuries.
Retired life looks like a curse.”
“I disagree with both of you.” smiled Mr. Desai. “Your
retirement planning does not depend on whether or not you have son or daughter.
It all depends on how well you have planned for your retirement.”
“We had all planned for our retirements. All of us had few
policies and post office certificates for our retirement.” said Mr. Mehta. “Additionally,
we had our PF amount with us. All put together we had some Rs. 10-15 lakhs for
our retirement.”
“There you are. You had invested only in traditional debt
instruments which could not grow your wealth in line with inflation. As a
result, you had a smaller amount for your retirement. This amount might have
appeared big in your young age but today you realize that it is small. To make
things worse, Mr. Khanna dipped into his retirement corpus to get his daughters
married in grand fashion.” said Mr. Desai.
“But in our community, it is mandatory to have a grand marriage
ceremony. Also doesn’t father aspire
that he celebrates his daughter’s wedding in the best possibly ways?” asked Mr.
Khanna.
“Well may be, but the question is, if that was you aspiration,
why didn’t you plan for it separately? How can a grand wedding ceremony be a
justified expense at the cost of your retirement??” asked Mr. Desai.
“I think you are right Mr. Desai” said Mr. Mehta. “So according
to you what is the right thing to be done? Rather what’s the secret you followed
that today you are so relaxed?”
“Let me guess. Your son financially supports pretty well. said Mr.
Khanna.
“Let me also guess. You had inherited huge wealth from your
father.” said Mr. Ghosh.
“Both of you are incorrect.” said Mr. Desai. I inherited nothing
but a small house to live from my father. Also me and my son are financially
independent. We live together and morally support each other nut neither he
seeks financial support from me nor do I seek financial support from him. I
think this is the one reason that’s make me feel proud of him and proud of
myself.
I had decided to start planning for retirement at an early age
of 25. Also, I realized that only debt instruments cannot create wealth for me.
Thus, I chose the way of equity which created good wealth for me. I started
saving small amounts per month gradually growing to Rs 1000 per month to Rs
2000 per month and so on as my income grew.
Last year, I retired with a wealth of more than Rs 2 Crores
which I invested in tax free bonds and now earning around 16-17 lakh per year
as tax free interest and I still have some Rs 40-50 lakhs in diversified equity
funds so that I continue to beat inflation hereafter.”
“That’s great Man. What a farsightedness!! But you know what??
Equities are not everybody’s cup of tea. It requires a lot of research to find
right stocks.” said Mr. Mehta.
“You are right. So if you can’t find so much time to research
for equities, you can choose the route of Mutual Funds and if even researching
mutual funds is also difficult for you, go for a fee based financial advisor.” said
Mr. Desai.
“But I always thought equities are risky.” said Mr. Khanna.
“Equities are volatile in the short term but in the long term, they
are the true wealth creators. Also, let us analyze the risk of not investing in
equities. Look at your all equity-less portfolios. Is not that a bigger risk
that your retirement wealth is far below required as you could not beat
inflation?” said Mr. Desai.
“But are not sons supposed to fund our retirement? We do much
for them. I still remember, I gave them everything they asked for, even if was
stretching my budget. At times, I ignored my parent’s requirement also to
fulfill my son’s wishes. But today, all they care about, is their children. We
don’t exist for them.” said Mr. Ghosh in agitated voice.
“Here come the double standards. You say that when you ignored
your parents to fulfill your son’s wishes, you were right but if your sons
ignore you to fulfill their children’s wishes, they are wrong. Why so? Also you
said, that you stretched your budget to fulfill their demands. Now ask this
question to yourself, whether it was a need or desire that children your
demanded? If it was a need then its ok but if it was a desire and you gave up
your retirement planning to fulfill it, then the only person to be blamed is
you not them.” said Mr. Desai.
“That ways I am lucky, my son gives me some money every month
for my expenses and also he fulfills their children demands. So, I would say,
he is an ideal son and ideal father.” Said Mr. Mehta
“I would agree only if you tell me, that after all this, he is
able to save and invest for his retirement.” said Mr. Desai.
“Well I am afraid, not.” said Mr. Mehta. “These days expenses
are so high that after doing all this, he is hardly left with any money.”
“In that case, I would suggest you to become his mentor and tell
him to start saving some money. In fact, don’t take me wrong, but your son is
facing this problem because your lack of planning. If you had planned your
retirement well, the money he is giving you could have been invested towards
his retirement.” said Mr. Desai.
“So what should I do now?” asked Mr. Mehta
“Please tell your son to prepare a budget for his monthly expenses
and try to curtail those which are unnecessary. This money needs to be
necessarily invested towards his retirement so that he doesn’t have to financially
depend on his son. Today, my son is not handling household expenses very well but
is also saving and investing 20-25% of his income towards his retirements. This
way he is not only securing his own retirement but is also taking off the
responsibility from his son. In a way, he is helping his son by planning his
own retirement.” said Mr. Desai.
“Is is not our culture that our best retirement planning is to
invest in our children?” asks Mr. Ghosh.
“That is only half the truth.” smiled Mr. Desai. “The fact is,
we Indians have a culture to save for our future. In your young age, future is
2 things i.e. your children’s working life and your retirement. Now, when you
give good education to your children, you are done their future but for your
retirement, you still need to save and invest. In fact, Western countries had a
culture of not saving for retirement. There, the government had enough
resources to take care of the retired. But you will be surprised to know, that
the trend is changing there too now. They have started saving for their
retirement.” said Mr. Desai.
“You have opened our eyes
today.” said Mr. Ghosh, Mr. Mehta and Mr. Khanna to Mr. Desai.
“Thanks for the compliments. A few last words which I would like
to share with you:
There has been a trend of old age parents being deserted by
their children as they cannot financially support them but if we want to curb this
problem, the first step is start saving and investing for your retirement. So
this is not only a social issue but a case of lack of planning.
Tomorrow, when your children grow up, they will have enough
liabilities including household expenses, home loans, children’s education,
self retirement etc. Make sure that YOUR lack of planning does not mess up
their finances. In fact, if you say that you care for your children, show this
care by doing retirement planning for yourself.
If you have doubt about investment
product and want more information regarding investment or you need investment
services, feel free to ask us. We also conduct the seminar on investment and
financial planning. If you are interested for seminar in your city just drop
the mail.
Warm regards,
Arvind Trivedi
Certified Financial Planner
