(Ravi Gupta is the bestselling author of ‘All You Want to Know About Investing’ and ‘MBA Through Stories’. He was awarded ‘Rajbhasha Gaurav’ prize by President of India for his article on ‘History of Indian currency Notes in 2017. In this column, he will apprise the readers about various avenues of investments with their pros and cons)
…Continued from Part 5
The table given below gives the maturity values of monthly savings of a fixed amount per month for a given number of years. For any other value of savings, you can multiply the amount of maturity value of R 100 pro-rata.
The table above is for 42 years because minimum and maximum employment age in India is 18 and 60 years. The non-employees or self employed can use this table as an indicator of what to expect by saving a fixed amount every month. Accounts opened under National Pension System are quite suitable for non-employees to save a fixed amount every month to secure retirement benefits. In case of employees, the mandatory retirement savings like PF and NPS, combined with gratuity could add to the savings accumulated over their earning career.
Myths About Retirement Planning:
There are certain myths about retirement planning which inhibit people from providing for their post-retirement life when there is still time available. These myths are:
1. Retirement planning is only for the employees: Nothing is further than truth. Even the non-employees deserve to live a dignified life post-retirement without any dependence upon others. This requires planning to generate sufficient income post-retirement to live a life independent of others.
2. Retirement planning is not for young people: The reality is that the more years you have left until retirement, the more years your money gets to grow. Hence, starting saving early is vital. If you have not started so far, the time to start is right now.
3. Retirement planning is for the old and the elderly approaching their retirement: This is obviously not true. At an advanced age, not much of retirement planning is possible. Planning to save to provide for old age should be everybody’s concern and not merely of the elderly people.
4. Why to bother about retirement planning when one lives only for a few years after retirement: Nothing can be farther from truth than this myth. With increasing longevity, risk of living too long is much more significant today than risk of premature death. Everybody must insure against the risk of living too long by creating an adequate retirement fund.
5. Another myth is that retirement planning is only about generating monthly income: It is only partially true, not the whole truth. It is essential to invest retirement corpus in various financial products to protect it against its two biggest enemies i.e. inflation and taxation. Proper planning is essential to make your corpus last longer for a carefree and happy post-retirement.