investment planning for retirement

7/29/2019 Investment Planning for Retirement

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Investment Planning for Retirement

An initiative of SEBI & NISM


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Agenda

Introduction

Retirement Plan

Financial Planning

SMART Goals Saving and Investment

Loan v/s Investment

Personal Budget

Calculator Personal Net worth

Calculator

Risk v/s return

Compounding

Inflation Effects on

Investment

Investment

Commandments

Investment Vehicles

Avoid investmentscams

Estate planning


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Need for financial education

Deterioration of personal finances

Proliferation of new and complex

financial products


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Retirement plan

Earn a satisfying income post-retirement

Enjoy a comfortable life post-

retirement


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Calculating the corpus

Retirement age (years) 60

Current age (years) 58

Life expectancy (years) 83

Years after retirement 23

Current annual expenses Rs. 1.80 lacs (Rs. 15,000 per mth)

Average return on investment 12% p.a.

Inflation 5% p.a.

Inflation adjusted return 7% p.a.

Total retirement corpus required Rs. 21 lacs (approximately)


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Action points for retirement plan

1. It is never too late to start

2. Deposit everything you can into

your retirement plan

3. Reduce expenses

4. Aim for good post-tax returns

5. Refine your goals

6. Sell assets that are not producing

income or growth and invest in

income producing assets


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Financial planning

Financial planning is a process ofmeeting your life goals through

proper management of your finances


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Financial planning process


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IDENTIFY GOALS

Goals are dreams with

deadlines

- Zig Ziglar


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Savings or investments?


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Loans or investments?


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Preparing the budget


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Importance of budgeting

Preparing a budget help: Keep track of all your incomes and

expenses

Control the expenses Make you aware of necessary and

unnecessary expenses

You get better control of your day-to-day

life


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Preparing a budget

Add up your income

Add up your expenses

Subtract expenses from income

Cut expenses

Increase income


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What is your wealth?

Correct measure of wealth is known

as net worth


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Net worth = assets liabilities

Assets = what you own

Liabilities = what you owe


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RISK AND RETURN


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Risk and Return

Risk and investing go hand in hand

Risk increases as the expected

potential return increases

No-risk, whats that?

Manage the risks


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The eighth wonder -

compounding Rs.1 lac invested @ 10%

Year Simple interest

@ 10% p.a.

Compound interest

@ 10% p.a.

1 1,10,000.00 1,10,000.002 1,20,000.00 1,21,000.00

3 1,30,000.00 1,33,100.00

4 1,40,000.00 1,46,410.00

5 1,50,000.00 1,61,051.00

20 3,00,000.00 6,72,749.99

25 3,50,000.00 10,83,470.59

30 4,00,000.00 17,44,940.23


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WHAT IS INFLATION?


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Effects of Inflation

Item Price in

2001-02

Price in

2009-10

Sugar (1 kg) Rs. 16 Rs. 40

Cooking oil (5 liters) Rs. 290 Rs. 500

Rice (1 kg) Rs. 14 Rs. 35

Petrol ( 1 liter) Rs. 33.46 Rs. 48.83


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Inflation Effects on Investments

InvestmentInitial investment Rs. 1,000

Interest on investment 5% p.a.

Value after a year Rs. 1,050

Inflation 6% p.a.

Your expenses after a year Rs. 1,060


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Retirement Planning

Start early and retire peacefully

Plan wisely

Track and review your plan

Dont dip into your retirement savings


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Investment needed to create

retirement fund


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Investment commandments Clear and reasonable goals All investments carry risk

Diversify to reduce risk

Select appropriate asset mix

Recognise limits of your knowledge

Do your homework

Income-tax is payable on investment returns

Avoid investing on basis of hot tips and rumours

Dont follow advice you do not understand

Say NO if you are not convinced

Dont take risks you cannot afford or are not

comfortable with


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CHOOSING THE RIGHTINVESTMENT OPTIONS


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Safety

ReturnsLiquidity


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Investment Vehicles and

Insurance Products


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Avoid investment scams


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CONCEPTS OF ESTATE

PLANNING


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Power of attorney

Nomination

Will

Assignment of insurance policies


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THANK YOU

investment planning for retirement

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