Retiremnet Planning - Part 2

From personal experience I can say that have always spent thinking I will catch up later. So at 30, I thought I have many responsibilities but when I am 40, I will start saving. However when I reached 40, there were more responsibilities so I deferred it further. Sadly my career is over and I don’t have the corpus I would have wished, today.

If I would have planned rightly I wouldn’t be in a situation where every rupee spent has to be well thought off. I also don’t want to be dependent on my sons. During my free time I sit back and think what can I do to increase my resources and secondly what advice would I give today’s youngsters on financial planning.

Please note these are my personal views and are not meant in a professional capacity.

Here are my thoughts broken down in 2 categories

Goal: To have a corpus that will allow you to maintain your standard of living post retirement

Why do you need to plan for retirement?

1. The earlier you start saving, the better for you. At 25, retirement is a long way off, but financial stability requires long term build up
2. Living for today is detrimental
3. There is no government support system for senior citizens. Even if you want to move to an old age home (a decent one) you need to have money
4. As life expectancy grows, if retirement age is not increased correspondingly, you will need to fend for a longer time post retirement
5. Families are shrinking. Don’t expect children / extended family to look after you. After all living independently and with self respect intact is what you should strive for
6. Inflation will play a big role in downsizing your savings
7. Economic recession, job insecurity will be a given
8. Health problems will increase manifold with aging

How to plan for retirement:

1. Make a table of all possible life expenses, your aspirations / expected lifestyle after retirement and factor in inflation

2. See where you stand today

3. Factor in your current earning, potential growth in earnings

4. Save in a few mandatory instruments – PPF (even if you have a PF account with your employer); Mediclaim / Health Insurance (you never know when a medical emergency will hit you)

5. As you grow professionally, keep increasing your savings in proportion

6. Keep some part of your savings liquid to be ready for any emergency

7. Invest in Stocks & mutual funds. Keep regular track of your investments

8. Invest in a pension plans with a track record

9. If you are not financially savvy, then take the help of a professional financial advisor

Planning for Retirement - Part 1

The other day while speaking to an old friend of mine, we realized that most of us (especially in the 65 plus age group) senior citizens ( married with children) have spent life assuming our sons will take care of us post retirement. I am speaking here from a very middle class perspective where we have earned enough to be comfortable, sometimes stretching the rupee but never in luxury. Our various financial responsibilities (taking care of families, probably getting sisters married etc) were taken as granted.

Somewhere we also took it as granted that our sons will look after us in old age. Here i say "sons" because though the world has changed now & gender equality is a given now (open to debate), in our times it was a given that sons, especially the oldest son took on family responsibility. Daughters were not included as it was assumed that post marriage, daughters moved on to "their" homes.

One factor was common – PF was used to get daughters married or in dire emergencies. Whatever money could be saved was saved in post office schemes, recurring deposits or insurance policies. Somewhere the comfort was that the son/s would take on the family responsibility.

However reality is very difficult from “belief”. Most of our children are not with us today. Some of our children offer to take care of us while others talk of their own mounting expenses and avoid shouldering responsibilities. For individuals like us who want to live with their self respect intact, it is a daily challenge to tackle rising costs. I also see some of my friends and hear of other’s experiences where their children talk of family assets but not of duties. In this scenario where does a senior citizen go?

Our generation made the mistake of not thinking of financial planning. I am speaking generically here. We took on duties and responsibilities because it was a given. But today we can’t expect the same from our children. In my next post I will be writing some of my observations so that young readers are aware of the potential financial mistakes early in life and can plan for their future correctly.

Will our cricketers vote in the forthcoming elections?

Reading the article " Bat, Bowl or Poll" in Mid-Day dated March 29, 2009 made me realise (and hopefully other citizens too) that our so called cricket & acting stars are Icons in name only. In deed only money rules. Reading some of the BCCI officials & ex players quotes one thing is very clear - they couldn't care less about voting (a national duty - the only thing that can move them is Money!

On one hand NGOs, ALMs are working hard to spread awareness on voting and on the other our cricketing stars , their team owners ( boasting of actors & industrialists) and BCCI officials look at voting as an avoidable chore. Ironically BCCI is headed by a Union Minister who should be promoting voting.

My wife and I are looking at rescheduling our trip so that we can vote. Maybe in the larger picture, our votes could be inconsequential. But we don't want to avoid our duty.

I see so many youngsters in our locality & members of our ALM doing so much (including helping people get their Voter I Cards, registering, getting political party representatives to meet us) to promote voting. To me these nameless people are our icons, not overpaid money loving cricketers & actors. They are the ones to emaluate.

IPL

IPL has been the flavour of the week. Every channel, newspaper is following the story with a breaking news headline! It seems as though the entire country and had only one question - What will happen to the IPL? Now that we know that IPL will be held in South Africa, I have a few observations to make on IPL -

1. IPL is a business model which can both entertain & give huge returns
2. National elections to elect a new government is a bigger priority than a business
3. It is not a team playing for the country, but various Indian teams (with non Indian players too) competing for awards /money
   
4. Lets not fool ourselves that this is about pride and cricket. Its all about money. If there was no money to be earned would players, team owners and most imporatntly BCCI be so interested?
5. Do Indian citizens know that BCCI claims to be a charitable body and therefore reaps huge tax benefits?
   
6. Amongst all these discussions, I would like to know if even one player stood up to ask a question that many Indians are asking today, " How will we vote"? Did this question even come to their minds? I don't know if there's a way they can vote from South Africa. I don't know the legalities. But do you think BCCI or any player thought of this?

Ragging - A heinous crime

I was shocked to see how a student at a medical college in Himachal Pradesh was ragged so badly that it lead to his death! Post that came news of a girl in Andhra Pradesh being ragged. Am sure there are thousands of such situations which probably never get reported. Being punished for such heinous crimes is a rare option.

Imagine the parent’s devastation. On one side they feel guilty of not taking up action when their child complained about ragging on the other side they know nothing will ever come out of the probe and the guilty will go unpunished. Even if the perpetrators are brought to book, they will escape stating they are being framed; witnesses won’t come forward; and the case will drag on. And parents of the perpetrators will move heaven and earth to ensure that their guilty wards go scot free.

What happens after ragging? Suppose a complaint does get registered. Are the students responsible rusticated? Is it ensured that they don’t get admission in other institutes through devious means? Is the case followed to its logical conclusion? Is anyone punished? I don’t know what happiness people get in degrading others. When I speak to my sons on this, they say their experiences have ranged from singing bollywood songs for a strech to greeting every senior on campus – I don’t know if they are keeping some bits off limit. But what is unfathomable is that young boys and girls don’t think of the consequences of their act while participating in degrading acts.
Obviously people who rag know some fundamentals –
- The perpetrators won’t get punished
- College Principals / Trustees will go unpunished
- Grants / financial aid won’t stop

Despite the Supreme Court's orders, ragging goes on unabated in educational institutes across India. With the Supreme Court coming down strongly on the states & colleges, can we see any real change? One can only hope so.

Dance of democracy

Mayawati as PM? Deve Gowda as PM? Is this what Indians really want today? What are the alternatives? Manmohan Singh / Sonia Gandhi / Rahul Gandhi? L K Advani? Mulayam Singh? Prakash Karat? India is at a stage today where corruption and money rule. Any of these can be the PM tomorrow not because of capability but because the party they belong to manages to win elections on the basis of false promises, money power, muscle power, fixing and the like. In this list, Manmohan Singh probably is the most qualified but is capability really the criteria here?

When India became independent & a republic, there was so much hope! Hope to be self sufficient, hope to be a progressive and secular state, hope to be a fair & just nation where the Mahatma’s words held real value. As children we saw India move from British rule to a new beginning. Yes, in Kolkata, we were besieged by refugees from erstwhile East Pakistan (now Bangladesh) and there was much despair because of riots etc, but there was still hope of a better future.

But once the Congress party started taking the electorate for granted and with their offset of becoming a family fiefdom, break away fractions and new parties became the norm. Regional parties started gaining popularity due to non governance and genuine grievances and sometimes due to power flexing. Soon they started wielding power at local levels graduating to the centre level. The seventies & eighties saw a stream of such regional parties becoming strong in various states.

I think the deterioration of Indian politics started when the focus shifted from governance to money. What started as a subtle funding operation is now a full fledged business of political parties. Need favour/s? Donate generously to the political fund. This has also ensured that a clutch of people actually hold the government in virtual control whether at the state level or central level. Think of it – why is it certain business houses and certain individuals seem to get away with murder? Why do the big builders across India get away every time? Why is it that poachers who are destroying our ecology get away? Why do corporate fraudsters escape punishment? Is it because they are above the law? Or is it because their coffers fund political parties in various ways?

Today I feel sad when I see the state of our country. Why is it that we Indians don’t collectively wake up from our slumber? Why do we always feel it is somebody else’s responsibility? Our nation is today fast spiraling downwards, but it’s in our hands and especially the youth to take charge.

You can think this is a rambling from an old man, but it’s my plea to the youth of this country to wake up and stem this rot. Be responsible when voting. Exercise your right. Think why certain events happen. And think how it will impact your life. Because today’s rampant construction, deforestations, poaching, illegal mining, corruption and non governance will destroy your tomorrow.

Costly travel plans

As I had mentioned earlier, we are planning a trip to Delhi & Kolkata. I realise that travelling has become a costly affair today.

Apart from the basic airfare / train fare, we have to factor in gifts for the relatives / friends we are visiting, F&B expenses ( if staying with relatives, may be reduced) sight seeing costs, shopping, conveyance. The list just keeps growing. Also if travelling with young children and senior citizens, one has to factor in medical costs too.

If we go for this trip, then we can only think of travelling next year. With my fixed pension, we can't deviate much from routine. It does get frustrating, but we can no longer spend assuming that the future will be managed. Today, managing daily basic costs are getting difficult so taking a holiday is actually the last priority.

other aspect to this is that many of us in the 60 plus generation defined holidays as going back to our native cities / villages etc. This way, costs were kind of controlled and the children too learnt family traditions, saw a different lifestyle and bonded with the extended family. Unfortunately today we have no one to go back to.

I do wish we had better cash flows & investments which we could utilise to break away from the daily mundane routines. But sadly that's just wishful thinking.