In 1960, an average Indian could be expected to live up to an age of 42. In 2011, the average age expectancy improved to 67.3 years for Indian males and 69.6 years for females. These figures from WHO clearly indicate that Indians are now living longer than ever before.
But this increased life expectancy comes with its own set of problems. Not only would people live longer post retirement, but they would also need more funds for things like medical treatment, therapies, etc. Yet, living a retired life need not be such a bad thing if all things are properly planned. And the right way to do it is to start building a retirement corpus. To be fair, a retirement corpus is best worked out when done early in life, but don’t worry, it is never too late to begin.
To build a retirement corpus, here’s what you need to bear in mind before you begin:
1) Lifestyle Cost
First up, there is a certain lifestyle that you lead today, say commute by a car, two movie outings a month, a family vacation every year, and so on. There is a direct cost that you can calculate as to what the sum that is required to maintain (or even expand) the current lifestyle. Once that sum is arrived at on a monthly or an annual basis, the next step will be to factor in the inflation. The thumb rule is a projected increase of 9% per annum. Thus, if the lifestyle cost is 10 lakhs annually, it will be close to 10.9 lakhs the year next and so on. Go on calculating the sum required for an 80 year and a 90 year lifespan.
2) Invest wisely
Depending on the stage of life, there are different strategies for building a corpus. For instance a person in the 30s could adopt a more aggressive stance and thereby taking bigger risks, while someone in the 40s would have to be a little more circumspect and careful with the capital. Based on the risk appetite, an investment strategy could be created that optimises the returns.
3) Medical costs
One of the prime costs with ageing is medical costs. Keeping in mind how prohibitively costly decent healthcare is these days, one can safely assume that it is going to be only costlier. Also, the fact that much of the burden will need to be borne by self, as by that time medical insurance of anything else will not cover the individual. In this scenario, one needs to assess the supposed costs and apportion a part of the corpus to fund that.
In the end, in the current scenario, where nuclear families are the norm, retirement can be quite unsettling, not only emotionally but also financially. It does not have to be so. With proper planning and investment, retirement could easily turn into an age where fun never ends.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.