Want Rs 1 lakh per month after retirement? Here's the corpus you'll need & how to get there
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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com .)
The PGIM India Retirement Readiness Survey 2023 revealed some interesting insights that I thought would be helpful for people who are considering building their retirement corpus.The survey found that households have identified financial goals like children's education, marriage, buying a house or car, starting a business, retirement, healthcare expenses, etc.However, most people do not save and allocate investments separately for each specific goal. At the time of conducting the survey, people had a number in mind which is roughly 10 to 12 times their annual income.Most tend to take the approach of building a corpus of 50 lakh or 1 crore or any such number which they intend to use as and when something becomes a priority. This usually tends to be financial needs for their children's education and marriage. Retirement, though a big need, takes a backseat.Separating investment accounts for each specific goal is important and allocating early and specifically for retirement is even more important for one reason alone. That is 'Retirement is the only financial goal of your life for which you do not get a conventional loan.'A gap in the requirement of any other goal can be fulfilled by an education loan, home loan, car loan, business loan etc. But not for retirement.Retirement planning often focuses on a required number – it could be Rs 50 lakh, 1 crore, 2 crore or 5 crore or more depending on the outputs from retirement calculators. In this post, I wish to draw your attention to a simple concept which can help you plan for this goal.To start with, ascertain how long it takes to replace one year's income with your savings and returns on your investment. And how much faster it gets if you already have a starting pool of money. In this regard, starting early has a huge advantage.Many Indians consider real estate as an investment avenue. Suppose your home is worth 1 crore gets a rental yield of 5%, how many years would it require to recover the cost of the house? Simple – 5% rental yield on a 1 crore house is 5 lakhs a year.So, in 20 years you would have recovered the 1 crore you paid for the house. I am not complicating it here by considering the cost of monthly maintenance, stamp duty, basic furniture costs, repair and other such costs though all of those costs matter in computing payback. To help with that, skip the last para.Similarly, in the case of savings, suppose you have an annual income of 12 lakh, and you save 10% (1.20 lakh) every year; how many years would it require to replace one year's annual income?Well, 10 years if you consider zero return. If your invested savings generate a 8% return, then it would take 7.5 years to get to 12 lakhs. If, at the start, you had an extra 1 lakh earning the same 8%, you could replace that 12 lakhs in 6.7 years. Again, I am not getting into the purchasing power deterioration over time due to inflation etc. For help with that, skip to the last para.Coming to retirement - say targeted at age 60, let's assume you wish to replace your current 1 lakh per month income or 12 lakh annual income. If you want this income for 25 years, (assuming life expectancy of 85 years), how much corpus would be required to replace your monthly salary?Using any online calculator, assuming a conservative post-retirement return on your investments of 6% per annum and considering 5% inflation, you will need approximately Rs 2.5 crore to generate Rs 1 lakh per month growing annually with inflation for 25 years. (This is using an inflation-adjusted withdrawal. Sounds complicated. Again, for help, skip to the last para). So, how do you accumulate this corpus?Let's assume Omkar is currently 25 years old. He wants to retire at 60. That gives him 35 years to build his corpus. His friends Ravi & Rohan who are older to him want to retire at 60 too.All of them have a need for a corpus that can replace their 1 lakh monthly income and also protect it for inflation over their retirement period. We know from our above example that you will probably need a corpus of 2.5 crore.But let's assume they require 3.25 crore on a safer side, so that they are able to meet any unexpected cash outflows in retirement. Now let's look at how much Omkar and his friends who start investing at different ages are able to save:Past performance may or may not be sustained in future and is not a guarantee of any future returns. Please note that these calculations are for illustrations only and do not represent actual returns. Mutual Funds do not have a fixed rate of return, and it is not possible to predict the rate of return.• Omkar invested 21 lakhs over 35 years and built a corpus of Rs 3.25 crore.• Ravi invested 30 lakhs over 25 years and accumulated Rs 1.9 crore. Ravi needs to invest a lumpsum of 9.10 lakh at the start of his investment journey to catch up with Omkar's corpus. Rohan invested 45 lakhs over 15 years and got Rs 1.26 crore. Since Rohan started late, he has to invest a higher amount – 37.63 lakh to match Omkar's corpus.Omkar, who started early accumulated a bigger corpus even though the contribution is less. Clearly, time played a crucial role in compounding the corpus. Thus, the habit of saving early can have a profound impact on the final corpus even if the saving is less.On a side note, don't be overly anxious as you see the outcomes on online calculators. Know that the key is in the skills you can monetize beyond your current professional skill. That's a topic for another time.In the meantime, you can take a look at our 50 Gigs Compendium which gives you an idea of the various skills you can hone, the technical training required and expected earnings from them here.So while the calculations above are simple and straight forward, we know that there are more variables and costs to consider and other dimensions that may impact our retirement lifestyle and wellbeing.It is also prudent to have adequate life insurance and health insurance during your active employment so that your dependents are provided for.The recommendation I have, to help you succeed in your financial journey, is this - Work with a trusted financial advisor who can help you understand all of the big and small variables you need to consider and help you navigate your life's unique challenges to build a secure future.I, for one, am thankful to my financial advisor to make my family's financial journey a well-planned one.(The author is CEO, PGIM India AMC): Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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Economic Times
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Celebrating freedom with reforms: Modi promises advancements in defence, technology, manufacturing, and major development schemes
Narendra Modi government is gearing up for next GST reforms by October. On Independence day, Modi unveiled Rs 1 lakh crore jobs programme. PM also assured the nation that India will become the third-largest economy soon. PM Viksit Bharat Rozgar Yojana will facilitate creation of 35 million jobs. Government will constitute task force to look into next-generation economic reforms. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Prime Minister Narendra Modi announced a 'Diwali gift' for the people two months ahead of the festival, declaring that the next set of goods and services tax (GST) reforms will be in place by October, besides underscoring a renewed reforms push, emphasising Atmanirbhar (self-reliant) Bharat as the bedrock on which Viksit Bharat will be built by 2047, and unveiling a Rs 1-lakh crore jobs programme, among other his 12th Independence Day speech that lasted 103 minutes, the Prime Minister also assured the nation he will soon declare from the Red Fort that India has become the third-largest economy in the the Opposition's charge of high unemployment, Modi also said the PM Viksit Bharat Rozgar Yojana being launched on Independence Day will facilitate the creation of 35 million Friday, he said, 'This Diwali, you are going to get a big gift. We are coming with the next generation of GST reforms.' The announcement comes close on the heels of parliamentary approval for two key items of legislation — the Income Tax (No 2) Bill and the Taxation Laws (Amendment) Bill — earlier this week. A total of 280 sections have been abolished in the Income Tax Prime Minister said the government has decided to constitute a task force to look into the prospects of next-generation economic reforms within a set time frame. 'Current rules, laws, policies, and procedures must be redrafted to suit the 21st century, to fit the global environment and to align with the vision of making Bharat a developed nation by 2047,' he PM said the policy changes will reduce compliance costs, besides boosting startups and small and cottage industries. Other benefits will include a smoother export process, improved logistics and systems, and the abolition of archaic laws that led to imprisonment for minor matters. Modi urged all sections, including political parties, his rivals and fellow leaders, to take part in the efforts to build a bright future.'I wish to tell my countrymen, everything I am doing, I am doing for the country, not for myself, not to harm anyone,' he said. 'Whether it is structural reforms, regulatory reforms, policy reforms, process reforms, or the need for constitutional reforms, we have made every kind of reform our mission today.'Atmanirbhar Bharat is the bedrock on which Viksit Bharat will be built, he said. He asserted that Operation Sindoor, the Gaganyaan mission and the manufacture of indigenous semiconductors has proved the power of self-reliance.'The greater a nation's reliance on others, the more its freedom comes into question,' he said. 'Misfortune arises when dependency becomes a habit, when we do not even realise it, when we abandon self-reliance and become dependent on others. This habit is fraught with danger, and hence one must remain vigilant every moment to be self-reliant.'Made-in-India weapons and defence systems helped India during Operation Sindoor, the Prime Minister asserted.'The enemy had no inkling of what weapons and capabilities we possessed, what power was destroying them in the blink of an eye,' he said. 'Imagine if we were not self-reliant, could we have executed Operation Sindoor with such swiftness? We would have been plagued by worries over who might supply us, whether we would get the required equipment, and so on.'The Prime Minister also announced the Sudarshan Chakra Mission for creating a complete security cover for all civilian installations across the country in the near the 21st century is a 'technology-driven century,' it is imperative that India does not lag behind, the Prime Minister said, adding that every nation that mastered technology scaled the heights of development and attained new dimensions of economic lamented that although India began the process of building infrastructure for semiconductor manufacture six decades ago, the plan was stalled, delayed and shelved while other countries mastered the technology and strengthened their position.'Today we have freed ourselves from that burden and advanced the work on semiconductors in mission mode,' Modi said. 'Six different semiconductor units are taking shape on the ground, and we have already given the green signal to four new units.'India is becoming self-reliant in space technology as well, the Prime Minister stated.'We are also preparing for Aatmanirbhar Bharat Gaganyaan on our own in space,' he said. 'We are working towards building our own space station. And I am very proud of the reforms done in space recently. 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The Hindu
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Time of India
an hour ago
- Time of India
Celebrating freedom with reforms: Modi promises advancements in defence, technology, manufacturing, and major development schemes
Prime Minister Narendra Modi announced a 'Diwali gift' for the people two months ahead of the festival, declaring that the next set of goods and services tax (GST) reforms will be in place by October, besides underscoring a renewed reforms push, emphasising Atmanirbhar (self-reliant) Bharat as the bedrock on which Viksit Bharat will be built by 2047, and unveiling a Rs 1-lakh crore jobs programme, among other initiatives. Independence Day 2025 Modi signals new push for tech independence with local chips Before Trump, British used tariffs to kill Indian textile Bank of Azad Hind: When Netaji Subhas Chandra Bose gave India its own currency In his 12th Independence Day speech that lasted 103 minutes, the Prime Minister also assured the nation he will soon declare from the Red Fort that India has become the third-largest economy in the world. Countering the Opposition's charge of high unemployment, Modi also said the PM Viksit Bharat Rozgar Yojana being launched on Independence Day will facilitate the creation of 35 million jobs. On Friday, he said, 'This Diwali, you are going to get a big gift. We are coming with the next generation of GST reforms.' The announcement comes close on the heels of parliamentary approval for two key items of legislation — the Income Tax (No 2) Bill and the Taxation Laws (Amendment) Bill — earlier this week. A total of 280 sections have been abolished in the Income Tax Act. The Prime Minister said the government has decided to constitute a task force to look into the prospects of next-generation economic reforms within a set time frame. 'Current rules, laws, policies, and procedures must be redrafted to suit the 21st century, to fit the global environment and to align with the vision of making Bharat a developed nation by 2047,' he said. 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'The greater a nation's reliance on others, the more its freedom comes into question,' he said. 'Misfortune arises when dependency becomes a habit, when we do not even realise it, when we abandon self-reliance and become dependent on others. This habit is fraught with danger, and hence one must remain vigilant every moment to be self-reliant.' Made-in-India weapons and defence systems helped India during Operation Sindoor, the Prime Minister asserted. 'The enemy had no inkling of what weapons and capabilities we possessed, what power was destroying them in the blink of an eye,' he said. 'Imagine if we were not self-reliant, could we have executed Operation Sindoor with such swiftness? We would have been plagued by worries over who might supply us, whether we would get the required equipment, and so on.' The Prime Minister also announced the Sudarshan Chakra Mission for creating a complete security cover for all civilian installations across the country in the near future. Since the 21st century is a 'technology-driven century,' it is imperative that India does not lag behind, the Prime Minister said, adding that every nation that mastered technology scaled the heights of development and attained new dimensions of economic power. He lamented that although India began the process of building infrastructure for semiconductor manufacture six decades ago, the plan was stalled, delayed and shelved while other countries mastered the technology and strengthened their position. 'Today we have freed ourselves from that burden and advanced the work on semiconductors in mission mode,' Modi said. 'Six different semiconductor units are taking shape on the ground, and we have already given the green signal to four new units.' India is becoming self-reliant in space technology as well, the Prime Minister stated. 'We are also preparing for Aatmanirbhar Bharat Gaganyaan on our own in space,' he said. 'We are working towards building our own space station. And I am very proud of the reforms done in space recently. More than 300 startups in my country are now working only in the space sector and thousands of youth are working with full potential in those 300 startups.' He expressed satisfaction at the pace with which the National Manufacturing Mission was progressing and reiterated the importance of the 'vocal for local,' 'zero defect, zero effect' and 'lower price, higher value' themes. Underlining the need for promoting indigenous products, Modi urged all traders and shopkeepers across the country to put up boards, saying 'Swadeshi goods sold here.' The new jobs programme is expected to create new employment opportunities for approximately 35 million youth. 'Today, on August 15th, we are launching and implementing a scheme worth Rs 1 lakh crore for the youth of my country,' he said. 'The Pradhan Mantri Viksit Bharat Rozgar Yojana is being implemented today… Under this scheme, the government will give Rs 15,000 to the youth, to every son or daughter who gets a job in the private sector.' Companies that generate more jobs will also be given incentives under the scheme.
