Retiring at 40

Session on "Retiring at 40 - How are you planning for it?

a.    First step when you start thinking retirement is to estimate what are the monthly expenses that you'll have after retirement
b.    2ns step of retirement planning, take into account inflation. It eats away silently into your funds
c.    Retirement income should be typically made up of investments like rental income, bonds, etc.
d.    Ideally retirement planning should consist of diversified assets with more to equity during earning period and towards debt as retirement approaches    
e.    insurance is not only investment, first goal of insurance is to give you and your family protection
f.    When you estimate retirement expenses, take into account your lifestyle, family history with respect to life expectancy, health conditions.
g.    Some of the things that have changed since our parent's time as far as retirement is concerned, is that we are a nuclear family setup. So you fend for yourself in retirement and life expectancy is much higher, and it will be more so perhaps 85-90.


1. What should be ideal inflation and return rates from our investments we should use in our computation when we are actually determining the amount required after 15/20 years?

Inflation rate should be 6-7%, and return post retirement7-8%

2. I've been investing in MFs for quite sometime but I always had difficulty in finding when to exit a fund based on performance. I normally exit when valueresearchonline rank goes down to 3-star. Is it a right approach?

Exit on MFs should depend on both how the fund/market is doing and on how far your goals have been achieved

3. ELSS is better or diversified MFs for long term planning?

ELSS purpose is for tax saving, so don’t mix this with other objectives.

4. Would disciplined investments in stocks be secure enough?

Only stocks/MFs is not enough, your portfolio should also have EPF/ PF, pension plans and rental income when talking of retirement corpus

5. What are the other avenues for investing other than mutual funds? Right now I have invested in MF and insurance - quite wary of stocks.

Look at PPF; it is one of the better avenues for retirement safe and tax efficient.

6. What does "How to Plan for other goals" mean?

Retirement and other goals have to go on simultaneously. You can’t say let me finish with my child's education, then I will focus on retirement.

7. What could be strong reasons retiring at 40? I hope this question is in line with the theme of this chat session.

A lot of young execs these days talk of retiring at 40 and then doing what they like.

8. What’s the ideal break up of various investment options for long term growth and also sustenance after retirement

Equity/MFs, pension PPF/EPF, house/for rental income, some bonds. You need to mix it up while you are in your early working years.

9. Consider investing in Silver rather than Gold, if you are planning to go for metals. Silver to Gold ratio is increasing like anything, because of its heavy demand. Whether you go for Gold or Silver, never go for ornaments. Always buy bars and coins.

I am very vary of investments into silver. Silver market is currently highly speculative. Therefore I would avoid suggest people to avoid silver.

10. You can also invest in Silver. But you will not any bank loan against Silver, but Gold you will get loan

Yes silver is good, but you need to invest only in physical form now

11. The first step to retire at 40 is to calculate what funds are needed during retirement - considering lifestyle, spend, family history etc.  What next? Can you give a break-up of the investments that need to have already...?

Next step would be to look at funds you need for specific goals like medical emergencies, foreign travel.

12. Any ideas about changes to PPF?

PPF changes only final draft to DTC will tell us.

13. I have seen a lot of retirement plans and the yield is anywhere btw it really worthwhile? There are other better investment options...

Pension plans alone will not be enough for retirement as you rightly said low return; it should form only 10% of your retirement corpus.

14. What is inflation rate? If someone says 6-7% is the inflation what does it mean?

Inflation rate assume that it is 6% very year, so prices/expenses go up by 6% each year.

15. If u retire at 40 then who will pay our loans...Housing Loan, 2/4 wheeler loans.. Etc...

Idea of retiring at 40 or 50, is to start planning for retirement no along with other goals.

16. Is NPS better than Diversified Equity MF plan for retirement?

These are 2 different types of investment meeting 2 diff needs. Should do both.

17. So assuming at 80 you need a corpus of 4.5 crores, how much should we start investing each month and what should be the breakup across MFs, stock, PPF etc.? In what percentage?

The corpus is needed at 40, not at 80, so this 25 years old has 15 yrs to accumulate this. Gain you need to list all your goals including retirement and then start mapping this against what your current assets and earning potential is.

18. Is the investment in real estate is good for long term

Yes, real estate investment is good and needs to be a part of overall portfolio

19. With 1 crore in bank FD at an interest rate of 6% per annum, we get monthly 50K. even considering reduction in interest rate inflation 4.5 crores seems to be on the higher side

The 4.5 crores need to last out 40 yrs in retirement and take into account inflation. The 50K you are taking about will be worth 1.2 lakhs when 40.

20. What about health insurance if we retire earlier? Which is the best health insurance to be taken?

Health insurance in these days of rising medical costs is very important; you must have an independent plan. The PSU mediclaim and the private ones like Apollo Munich are equally good

21. Your view on NABARD deposits/bonds?

There isn’t a blanket opinion on whether bonds work or not, but they should form part of your portfolio especially when you're nearing retirement or retired.

22. If India is developing so fast, wont the FD interest rates fall to sub 4% in near future?

Correct that in future the rates are likely to fall. But it’s very difficult to predict with certainty what would be the FD rates. Therefore the whole process of planning for retirement is a process that requires continuous monitoring.

end faq


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