Click here to Download Retire Rich PDF Book by P V Subramanyam Language English having PDF Size 7 MB and No of Pages 314.
By most common definitions, you retire when you stop being part of the workforce, either by choice or by having reached the age limit prescribed by the government. Is this your dream of retirement? However, retirement is easier to describe than define – in that, sometimes it is a state of mind. Retirement is when we no longer have to (or can) work for monetary rewards.
Retire Rich PDF Book by P V Subramanyam
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About Book – Retire Rich PDF Book
It is normally seen as an age – and your retirement age is a function of your profession. Thus, gymnasts retire at 20, cricketers at 34, actresses at 32, actors at 75, salesmen at 50, other employees at 58 or 60 years, and doctors and lawyers when their bodies do not listen to their minds. Of course, one class beats them all — politicians retire at 90!
Not all retirement is voluntary or mandatory: sometimes retirement is forced on you, due to unforeseen circumstances. For example, a surgeon or a dentist with failing eyesight or trembling hands may have to seek semi – retirement. Retirement planning is understood by people in many ways — what to do with the spare time on your hands, where to settle down after you have left the corporate world.
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Whether to move and when to move into a retirement home, and so on. Here, we are talking about how you should plan your retirement financially. In this chapter, we discuss money. We debate when to start investing exclusively for retirement (earmarking funds for investments), at what age to retire, the various types of insurance — life, medical, and critical care — and whether you need it.
The reasons why you need to undertake retirement planning are not very different from why you need to do financial planning. Retirement planning is a very complex process, one that is easier to describe rather than define. Let us analyse the factors that go into successful retirement planning.
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Without getting into relative terms, Situations 1 and 2 are close to a disaster. And don’t forget, if your expenses are only slightly lower than your income, then the demon called inflation will quickly bump you up from the third category to the first two categories. So, you are ‘comfortable’ only if your income is far higher than your expenses.
Your retirement life should be distributed into at least 4 parts, if not more. Let me explain. Let us assume you retire at 55 and live until the age of 95 years. Your lifestyle (and therefore your expenses and income) will be divided in 4 blocks as follows: 55 – 65, 65 – 75, 75 – 85 and 85 – 95. Once you have decided your ‘blocks’, estimate your ‘retirement income’.
From 55 to 65 years you may end up earning some amount by pursuing some activity – right from maintaining accounts for co-operative societies, to teaching in a coaching class, being on the Board of some companies, or doing part time consulting. Apart from this, you should identify any income you will have in retirement – pensions, as well as any rental, dividend, interest or other income. Retire Rich PDF Book
Let’s say you are not in the lucky few that are in Situation 3. If your expenses are high (a matter of fact, not of opinion) you need to reduce expenses dramatically. Hold on a second. You believe your expenses are not that high and that you can sustain it? Let’s bring you up against reality.
By now you also realise that the servant who comes home or the driver who drives the car are providing you services. You also realise that money is in short supply and has to be rationed. If you have sensible parents, they talk to you about money responsibly. If they are not sensible, they fight over money. It is time when you compare the people around you – and start making money judgements.
You know that a person with a bigger car, house, and vacations is considered rich! At this point you are able to handle budgets and rationing of money. If you are told that you have a Diwali budget of Rs. 5000, you know that you can buy a dress for Rs. 4500 and Rs. 500 has to be spent on crackers! Retire Rich PDF Book
You have already asked for your first mobile phone and you did not like the budget of Rs. 8000 that your parents set for you. You have started realising the importance of budgeting, saving, etc. You are understanding words like inflation but are still too young to understand the implication of that word.
Let’s look at each factor and start with Specific. The specific goal should be in physical terms/age. For example, you could say, “I want to retire at 55”. However, retirement is a function of money rather than age. This means your retirement goal should actually read, “When my portfolio consisting of retirement assets is worth Rs. 2 crores, I will retire”.
Then, you could go about taking action towards retirement, by using the Retirement Goal calculator with a monthly investing ability of Rs. 33,000. When he came to me for his retirement planning, he was saving for his daughter’s education (Rs. 18.000 per month), a foreign trips (Re. 12,000. per month) and Re. 3,000 for his retirement. Retire Rich PDF Book
Be careful about your behaviour! Understand risk. There are no ups and downs in the market – the ups and downs are in industries. Even in 2008 if you had bought Colgate, Hindustan Unilever Ltd. (HUL), Procter And Gamble (PnG), Asian Paints (yes 2008 peak) you would have still made a lot of money till 2017.
What crashed in 2008 was Larsen and Toubro (LnT), Tata Power, Kotak, Cholamandalam…some of them have not yet hit the 2008 price even after 10 years of market recovery! Hence it was an infra collapse, not a market collapse. The lessons of these examples are that we must diversify sufficiently, always on guard against the various threats that loom in the financial world as well as in our personal lives.
Divorce for example, is a huge value destroyer. Remember to invest in relationships. From an investment angle, investors should look for businesses that are stable – a Procter And Gamble or Gillette maybe more stable than a Uber or Ola! These should at least be a little less subject to the natural destruct that we see in real life. Retire Rich PDF Book Download
Compounding is indeed the most powerful “shastra” at your command as you try to create wealth beyond meeting all your life’s goals, whether it is to run a marathon, or accumulate a million dollars for retirement. There are no end lines for you to reach. There is no prize for finishing.
Just as difficult as we labour to save and invest so that compounding can do its work, we must also be careful how we behave with our resources, making sure we nurture them accordingly, and manage them well. When it comes to saving and investing, people are obsessed with the returns they’re going to get on their money.
Whether it’s debating the merits of a particular investment strategy, discussing the pros and cons of insurance, pensions and mutual funds (or increasingly unit – linked plans) or simply searching for the best interest rate on bank deposits, the returns dominate people’s thinking. This is perhaps the main reason that people choose National Savings Certificates, PPF, and other ‘guaranteed’ return products. Retire Rich PDF Book Download
This is perfectly correct, because, the better the returns you get, the more money you’ll end up with. Two more factors determine how much money we end up with – the amount we put into our savings and investments in the first place and the amount of time we have it there. These two factors will have a far greater impact on how much money you end up with than mundane things like investment returns.
For instance, let’s suppose that you need to cobble together Rs. 5 crore over 40 years and you reckon on getting an investment return of 12% per year. If you pop the numbers into an excel file, you’ll see that you have to save a paltry Rs. 3,980 per month. Now imagine that you spend an extra ten years of your life on the spending mode and you find yourself with just 30 years to get your Rs. 5 crore together.
At the same 12% per year investment return, you’ll now have to save a difficult Rs. 14,000 per month. More than three times the monthly amount, although we’ve only taken 25% off our time period. The amount that is accumulating in this plan cannot be used for any other purpose, and a partial withdrawal is not possible. Also, annuities have an additional expense: mortality charges. Retire Rich PDF Book Download
Annuities have limited investment options, sometimes making it difficult to build a fully diversified portfolio. If you are maxing out your PPF and want to contribute to an annuity as well, make sure you choose one that has no mortality charges and very low asset management charges (under 1.5% per annum) across all asset classes.
Tapping an annuity before you hit the withdrawal age is never a good idea, though, because you’ll owe a huge tax burden on the withdrawal. Personally speaking, I am not a big fan of deferred annuity (classic plan): it offers a guarantee but also a very low rate and no flexibility at all on the premium payment.
Instead buy a ‘single premium deferred annuity’ (in other words, deferred pension plan) where topping up is allowed indefinitely. If you are at least 15 years away from retirement you should not want your long – term money locked up in a government security-like instrument, although the asset management charges are lesser. Retire Rich PDF Book Free
Cashing in your provident fund at a young age is not the only way for your retirement fund to meet an early demise. Not saving enough in the first place will guarantee that your retirement will be painful. Of course, no one wants to be told to ‘save’ — it is so boring and perhaps not gratifying at all. It is all about choices – if you choose pain now, pleasure will come later on.
If you choose pleasure now, pain will follow! This is what low – savers (and non – savers) are really doing: they are spending their retirement now, which may mean they will not be able to retire at all. Buy that Plasma TV now, or buy time in retirement tomorrow. Take a cruise this year, or take time off several years from now. Those are the choices you have to make.
Building a nest egg is not a decision of whether to consume, but when to consume. Do it now and you will not be able to do it later without having to work for a salary. Translate all your needs into ‘number of day’s effort’ and you will realize the real cost. If that dream house is Rs. 72,53,000, and your take home pay is Rs. 8,00,000, it means 9 years of your life is for your shelter on a gross basis. Retire Rich PDF Book Free
On a net basis (i.e. the savings per year, it is perhaps 18 years effort). How to arrive at the cost of the house? Just multiply your EMIs with the number of installments. You might surprise yourself in how expensive your house is! Asset allocation is a technique that aims to balance risk and create diversification by dividing assets among major categories such as cash.
Debentures, shares, real estate, gold and derivatives. Each asset class has different levels of return and risk, so each will behave differently over time. For instance, while one asset category increases in value, another may be decreasing or not increasing as much. For most investors it is the best protection against a major loss, should things ever go amiss in one investment class or sub-class.
Asset allocation is one of the most important decisions that investors make. In other words, your selection of shares or debentures is secondary to the way you allocate your assets to high and low – risk shares, to short and long-term debentures, and to cash. Mr. Bhaskar is an executive who is 29 years old. He has recently got married and his annual expenses are Rs. 272,000. Retire Rich PDF Book Free
Out of this Rs. 72,000 is his EMI for a house that he had bought 5 years back. He estimates his annual expenses to continue at Rs. 200,000 adjusted for inflation. He expects to work till his age of 60 and wants to provide for his post retirement life – which he estimates to be till age 85 years. He wants to provide for inflation at 6% p.a throughout the 56 years that he expects to live. He expects to earn 8% per annum after tax on his retirement corpus.