The Path to a Secure Retirement: Start Early, Stay Consistent, and Adopt a Disciplined Approach


Retirement is a stage of life when you can bid farewell to work responsibilities, enjoy unhurried mornings, and savor precious moments with loved ones. It’s an opportunity to relish hobbies, bond with grandchildren, and indulge in activities that bring you joy. However, securing a comfortable retirement requires early planning and unwavering commitment. Here’s why starting early and maintaining discipline in your retirement plan is crucial:

  1. Changing Family Dynamics: In today’s world, cultural and societal changes often lead to adult children living abroad or independently from their parents. To avoid becoming financially dependent on offspring, planning for retirement early is essential.
  2. Increasing Lifespan: Advances in technology and healthcare are prolonging human lifespans. While this is a blessing, it also means you need more financial resources to support a longer retirement.
  3. Inadequate Social Security: Many countries lack robust government-provided social security systems, making it imperative for individuals to build their retirement nest egg.
  4. inflation or rising costs: As we know, the prices of essential as well as non-essential items keep rising year-after-year. While the impact of such price inflation is not felt in the short term, it hugely impacts the financial situation over the years. If we consider the increasing lifespan, resulting into spending few decades in retirement, inflation will have a substantial impact.
Current Expenses Rs. 50,000 p.m.
Present Age 35
Retirement Age 60
Life Expectancy 85
Rate of Inflation 6%
Rate of returns (Post-Tax) 8%

Consider Mr. Shah, a 35-year-old software engineer with a monthly income of Rs. 2,50,000 and monthly expenses of Rs. 50,000. He aims to retire comfortably at 60, giving him a retirement horizon of 25 years.

If we adjust the expenses for inflation, when he reaches 60 years of age, Mr. Shah would be spending Rs. 2.14 lakhs per month to maintain his current lifestyle. That is a more than 4 times compared to current expenses.

Mr. Shah’s retirement plan

Calculations suggest that Mr. Shah would require a retirement corpus of Rs. 5.13 Crores at the age of 60 years in order to generate a monthly income of approximately Rs. 2.14 Lakhs per month in the first year. Thereafter the monthly income from the portfolio would keep rising at the rate of inflation (as assumed in the table above).

Since Mr. Shah is 35 years old at present, he has25 years to save and invest in order to accumulate this corpus. If his investments generate average return of 12% p.a. for the said period, he would need to invest a sum of Rs. 27,073 per month. However, if he takes a conservative stance and invests in a less risky portfolio that generates 8% p.a., he would need to increase his monthly saving to Rs. 53,662.

Cost of delay

Many investors argue that retirement is too far away and delay planning for this important goal. Let us take Mr. Shah’s example to check if such a delay is a good idea.

The table below illustrates this taking different starting ages, keeping the post-retirement year, life expectancy, and other factors constant.

Current Age    35 40 45 50 55
Years to Retire 25 20 15 10 5
Post Retirement Years 25 25 25 25 25
Future Monthly Expenses 2,14,594 1,60,357 1,19,828 89,542 66,911
Retirement Corpus 5,13,74,076 3,83,89,698 2,86,87,015 2,14,36,607 1,60,18,680

Now, let’s explore the monthly investments needed to achieve these retirement corpus targets with expected rates of return set at 12% and 8%. Mr. Shah would need to invest Rs. 27,000 per month (assuming a 12% return) or Rs. 53,600 per month (assuming an 8% return). These figures are illustrated for different starting ages:

Monthly Savings Required
Age 35 40 45 50 55
Expected Rate of Return 12% 27,073 38,422 56,854 92,264 1,94,198
Expected Rate of Return 8% 53,662 64,744 82,352 1,16,398 2,16,566

In summary, this data underscores the importance of starting early and staying consistent in your retirement planning. Delaying your retirement plan necessitates significantly higher monthly savings. Remember, when it comes to securing your retirement, “The earlier, the better…”

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