How to plan your retirement in 3 simple steps
- From: dream trades <vinayaktrades@xxxxxxxxx>
- Date: Mon, 30 Jul 2007 17:10:53 -0000
How to plan your retirement in 3 simple steps
for more such article visit
http://gauravshines.blogspot.com/2007/07/how-to-plan-your-retirement-in-3-simple.html
The second phase of retirement planning is tougher than first phase.
Also very less is written about this phase. This is the phase when we
survive on our financial capital.
Individuals have two forms of capital, human capital and financial
capital. Many of us who work to generate income are human capital.
Second form of capital is financial capital. Financial capital is our
savings and investment.
How to plan for your retirement?
We start our career as human capital. Over a period of time we save/
invest and create financial capital. When we retire we only have
financial capital. We remain human capital as long as we keep working.
Moment we cease to work we become dependent on our financial capital
In most cases our human capital is stronger than our financial
capital. If you are currently earning Rs 3 lakh per annum, you will
require at least Rs 37.5 lakh worth of capital to generate income
equivalent to your salary at 8.00% return. Also your salary will keep
pace with inflation, while your returns from financial capital may or
may not beat inflation.
The reason second phase of retirement is more difficult to plan is
because, during this phase
We are dependent on our financial capital
There will not be any kind of addition to already created capital
Financial needs are unique and dispersed
During retirement we require liquidity to meet contingencies. We also
require regular income to meet routine expenses and we also want our
capital to grow at a rate, which is equal to or preferably higher than
inflation.
All the three needs of, liquidity, regular income and growth are like
three legs of a tripod. All three are needed for the tripod to stand.
Unfortunately all are in opposite direction to each other.
If we place our entire retirement corpus into savings bank account, we
will have liquidity. However, there will not be any growth. If entire
retirement corpus is in stock than there is growth but income may not
be regular. On the other hand if we invest all funds into post-office
monthly income scheme/senior citizen saving scheme than there is
regular income but liquidity will be at a cost of interest/penalty.
Why FMPs are more lucrative than Bank FDs?
For our retirement tripod to stand, we need all three legs to stand in
balanced manner. If any one leg is absent or off balance than our
entire retirement will become imbalanced.
Mutual funds as an investment vehicle may well be used for planning
retirement finances in second phase.
10 myths about Systematic Investment Plans
Contingency/emergency funds can be parked in either liquid funds or
floating rate funds. There are few mutual fund companies, which even
give access to the investment through ATM facility.
For regular income, either invest in monthly income plans or choose a
debt fund and opt for SWP (systematic withdrawal plan).
Lastly, for growing your retirement corpus, opt for equity funds.
Retirement is wonderful. It is doing nothing without worrying about
getting caught at it. However, unplanned retirement is exactly the
opposite - it is neither wonderful nor worry-free and you will get
caught at it!
- Gaurav Mashruwala
The author is a Certified Financial Planner. He may be reached at
gmashruwala@xxxxxxxxx
--
FOR FULL NEWSLETTER ON NIFTY PLEASE VISIT
http://tradersplace.blogspot.com/
FOR INTRADAY CALLS AND TECHNICAL TRAILS PLEASE VISIT
http://stockrumours.blogspot.com/
VINAYAK
ADMINISTRATOR,
TEAM STOCKRESEARCHERS
PERFORMANCE SPEAKS
.
- Prev by Date: Re: Water Gate Manifesto
- Next by Date: Re: Simple question on tax on uneraned income
- Previous by thread: Re: Water Gate Manifesto
- Next by thread: WTF---another enormous natural resources giveaway?
- Index(es):
Relevant Pages
|
