While Rs 1 crore may seem to be a substantial amount for retirement, several critical factors such as accounting for lifestyle, inflation, and healthcare expenses must be kept in mind.
Retirement is a crucial phase of life that demands financial preparedness. Retirement planning, therefore, has gained significant traction as individuals seek financial independence and security during their post-career years.
A fundamental question, however, that often arises is: Whether Rs 1 crore is enough for retirement? That is because this is the figure that keeps coming in regular discourse. In fact, post the launch of the Kaun Banega Crorepati (KBC) reality quiz show years back, becoming a crorepati has become the common man’s dream in India.
So, while this figure may seem substantial for many, several critical aspects need consideration when targeting a retirement fund. Here is what must be kept in mind.
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Lifestyle and Expenses
One of the key factors in determining the adequacy of a retirement fund is your expected lifestyle and expenses. Different individuals have diverse needs and aspirations for their retired life. Some may prefer a frugal lifestyle, while others may have higher expectations in terms of travel, leisure, healthcare, and other activities. Assessing your expenses post-retirement is crucial to estimate the funds required.
Rising Costs
Inflation impacts the purchasing power of money over time. While Rs 1 crore might seem substantial today, it’s important to factor in the effects of inflation, especially over several decades of retirement. As prices for goods and services rise, the value of your savings can diminish if not accounted for adequately in your retirement planning.
Healthcare Expenses
Healthcare costs escalate with time. India’s healthcare landscape is evolving, and medical expenses can be a significant burden during retirement. The increasing costs of medical treatments, insurance, and potential long-term care should be the key components of retirement planning.
Life Expectancy
Increased life expectancy is a positive outcome of advancements in healthcare and lifestyle. However, it necessitates a more extended period of financial sustenance during retirement. Planning for a longer lifespan than expected can safeguard against outliving your savings.
Investment and Returns
A crucial aspect of retirement planning is the investment strategy. While aiming for a specific corpus, the choice of investment instruments plays a vital role. Diversification across various assets and an appropriate balance between risk and returns are vital. Equities, mutual funds, fixed deposits, and other avenues should align with your risk tolerance and financial goals.
Adhil Shetty, CEO, Bankbazaar.com, says, “Starting early for your retirement is the key. Let’s consider a scenario: a 25-year-old investor initiates monthly investments of Rs 5,000 toward their retirement savings. By the time this individual reaches the age of 60, the total investment made would amount to Rs 21 lakh. With an assumed average return of 10%, the investor’s retirement corpus would accumulate to Rs 1.9 crore. Now, if this same individual had delayed their retirement planning, starting at the age of 30, even with a higher monthly investment, achieving a similar corpus would prove challenging.”
For instance, investing Rs 7,000 per month over the subsequent 30 years until retirement would yield only a total corpus of Rs 1.5 crore.
Additional Sources of Income
Apart from the targeted retirement fund, consider other potential income sources post-retirement. This could include rental income, pension plans, annuities etc. Supplementing your savings with these income streams can enhance financial stability.
In conclusion, while Rs 1 crore may seem to be a substantial amount for retirement, several critical factors such as accounting for lifestyle, inflation, and healthcare expenses must be kept in mind. Regularly reviewing and adapting your retirement plan as circ*mstances change will ensure a more secure and comfortable retirement. The goal of retirement planning is not just to accumulate a specific amount but to create a financial roadmap to enjoy your retired life.
