Hyderabad: General perception is there won't be much expenditure after retirement. Many people tend to think like this. When they are in employment or business, the majority of people only bother about their immediate earnings and monthly expenses. There are some, who estimate in advance what sort of problems await them when their monthly income stops all of a sudden. Only such people, who plan in advance, will ensure a happy and peaceful retired life for themselves and for their spouses and family members.
Everyone works hard for over 35 years day and night to make good earnings by the time they retire at the age of 60. In view of technological medical advancements, the average lifespan of a person has gone up to 90 years and above. It means they will have to go without a monthly salary for a long period of 30 years post-retirement. But, they have to somehow meet the day-to-day expenditures.
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Inflation is another issue that retired people should watch. If a 40-year-old is incurring a monthly expenditure of Rs 1 lakh, it will go up to Rs. 2.65 lakhs due to a price rise by the time he reaches 60 years. The expenditure will further go up to Rs. 7 lakh by the age of 80 years and Rs. 11.5 lakh by 90 years. Going by this, over a period of 50 years, there is a chance that spending will rise by 11 times. This may look unbelievable, but this is the estimated increase in expenditure that is more than the so-called yearly inflation of 5 per cent. None can forget such facts in real life.
Aiming at long-term prospects is as important as making early investments with one's hard earnings. Only then your money will have a continued growth rate under the impact of compound interest despite inflation. For example, a 25-year-old person went on investing Rs 10,000 per month. At the rate of 12 per cent annual interest, he would have in his hands over Rs 5 crore fund by the time he reaches 60 years. If he increases his investment by 5 per cent every year, he would get a higher amount of Rs 8 crore.
It is very important to make a perfect financial plan in advance so as to get a lump sum amount by the time of retirement. This should give us financial stability despite monthly income stops for a retired person. At the same time, ways should be explored to get tax relief on one's income. Over time, while continuing to receive assured income, investments may be withdrawn partially to meet emerging requirements.
