Retirement Planning BasicsbyRajesh Dalmia CFPCMDalmia Advisory Services Pvt LtdKolkata-Indiawww.dalmiaadvisory.com(Financial Planners) : Retirement Planning BasicsbyRajesh Dalmia CFPCMDalmia Advisory Services Pvt LtdKolkata-Indiawww.dalmiaadvisory.com(Financial Planners)
Slide 2 : What is retirement planning ? Retirement Planning is the process of insuring that
there are sufficient financial resources to provide a
desired lifestyle in the retirement years.
Slide 3 : Why Retirement Planning People are living longer
Inflation destroys purchasing power of money
Job insecurity
Breakdown of joint family system
Slide 4 : Individual’s Retirement Planning Cycle An individual’s life can be divided in the following parts:
a. Pre working (Beginning) : No worries for retirement
Working (Consolidation) : Start planning for retirement
c. Nearing retirement (Transition) : Start preparing for retirement
d. Post working (Retirement) : Enjoy the fruits of retirement
planning
Slide 5 : Preparing for retirement Retirement planning’s three fundamental questions:
How much you have today?
How much will you need when you retire?
How do you build what you have today into what you will need at retirement?.
Slide 6 : a. Retirement Objectives
1. Retirement Lifestyle
2. Financial Independence
3. Early Retirement
4. Estate Planning
Life expectancy
Expected post retirement expenses & income
1. Income replacement method
2. Expense replacement method
d. Addressing Risk Consideration while planning for retirement
Slide 7 : Hurdles in preserving lifetime incomes
a. Longevity Risk
b. Inflation Risk
c. Asset Allocation Risk
d. Excess Withdrawal Risk
Health & Expense Risk
Falling Interest Rates
Taxation
Preference of present consumption
Government legislation
Non adequate planning for emergencies
Slide 8 : 1. Retirement plans and pension streams
2. Savings and Investments
3. Earnings from Job during retirement
4. Assets that could be liquidated Sources of Retirement Income
Slide 9 : Investment vehicles for Wealth Creation a. Real Estate
b. Bullion
c. Shares
d. Small Saving Schemes
e. Pension Funds
f. Mutual Funds
g. Life Insurance
A Time Line for Making Important Choices : A Time Line for Making Important Choices The time line starts TODAY
During your working years, you need to periodically review you retirement plan
By age 50: you should start thinking more about what you would like to do during retirement
By age 55: you can begin reallocating your investments with retirement in sight
By age 60: Put a road map of all your retirement activities and investment funding with asset allocation highly in favour of debt investments
Factors That Determine Your Savings Needs : Factors That Determine Your Savings Needs Your current age
Your current income
Your desired retirement income
Your current retirement savings
Other sources of retirement income (Social Security, etc.)
Your tax rate
The expected rate of inflation
The expected return on your retirement savings
Slide 12 : Throughout working years
Review retirement savings plan
Make certain you are saving enough, especially after major changes (birth of a child, for example)
Slide 13 : Four Important lessons for Retirement planning Start Early
Save as much as you can without hurting your life plans or atleast 15-20% of your income for retirement
Take advantage of tax deferred or tax efficient saving schemes
a. Mutual Funds
b. Pension Plans
c. PPF
4.
Don’t be too conservative with retirement investment during saving phase
Slide 14 :
Slide 15 : REGULAR INVESTMENT AND TIME PERIOD
Slide 16 : ASSET ALLOCATION
Asset allocation is very important, as it helps in earning a modest return based on
portfolio.
Slide 17 : How change in withdrawal habit will affect the lasting of corpus
Slide 18 : Cost of delaying in starting a retirement plan
To build a corpus of Rs 50 lacs at age 55, one needs to start saving following amount at given asking ROI.
Golden Rules of Retirement Planning : Golden Rules of Retirement Planning Take charge of your retirement planning by investing early in life through tax-sheltered retirement accounts
Use long-term investment strategies, being certain to take enough risk to increase the likelihood that you will have enough money.
Always save within an employer-sponsored retirement plan at least the amount required to obtain the largest matching contribution from your employer.
Golden Rules of Retirement Planning (Continued) : Golden Rules of Retirement Planning (Continued) Contribute to PPF or other saving plans, if necessary, to supplement your employer-sponsored plans and during years when you are not eligible for an employer plan.
Leave your retirement money where it belongs during your working life – in your retirement accounts. Do not borrow it. Do not withdraw it.
When changing employers rollover the funds into the new employer’s plan. This is possible if you have a defined contribution plan.
Avoid Big Mistakes in Retirement Planning : Avoid Big Mistakes in Retirement Planning Underestimating your retirement savings goal.
Starting too late to save and invest.
Not contributing enough to maximize your employer’s matching contribution.
Avoiding risk by investing too conservatively (allows inflation to eat away at your investment return).
Taking cash distributions or account loans before retirement.
Underestimating how long you will live.
Overestimating how much you can withdraw.
Slide 22 : Thank you for attending the session
If you have any question do ask me now
You can contact me at
rajesh@mandarfin.com
www.dalmiaadvisory.com