The document summarizes key points from a retirement planning seminar held in Neyveli, India on September 2, 2012. It discusses why planning for retirement is important given factors like stopping regular income, continuing expenses, lack of family support, increasing life expectancy, lack of social security in India, and desire for dignity in old age. It then covers retirement planning basics like erosion of money value over time, importance of positive real returns, and the power of compounding. The document provides guidance on accumulating funds during working years, estimating retirement expenses, suitable investment options before and after retirement, and managing the consumption phase in retirement. It also addresses common misconceptions around retirement planning.

1. Retirement planning seminar – Neyveli 02-09-2012
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2. Why plan for
retirement?
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3. Why?
On retirement, your regular
income may stop. But
expenses continue.
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4. Why?
Support of joint family not
available any more.
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5. Why?
Increasing life expectancy…
You may live longer. So you
need more money.
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6. Why?
Lack of social security
in India.
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7. Why?
Imagine life…if you run out of
money at old age, when it is
not possible to earn any
more.
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8. Why?
You expect dignity and
respect in old age.
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9. How?
Before proceeding, let’s brush up the basics…
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10. You surely have seen this…
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11. But have you ever noticed this?...
I “Promise” to pay the bearer the sum..
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12. Basics # 1: Erosion of money value
As a consequence, value of money keeps diminishing all the time.
It is a reality of life.
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15. Probably the highest denomination currency in the world!...
Result of indiscriminate printing of money!
And note the words “I promise to pay…” 15

16. What you see is
NOT what you get.
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17. 12% interest rate…
Nominal return
• This is what you
see
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18. After 20% tax, you get 9.6%
Nominal return
Post tax return
• This is what
you get after
tax
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19. Adjusting for 7% tax, you get 2.6% effectively.
Nominal return
Post tax return
Inflation adjusted
real return
• This is what you get
after tax & inflation
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Basics # 2: Real return.

20. COMPUTING REAL RETURNS
Pre tax Tax Post tax Inflation Real
return slab return return
Case 1 7% 30% 5% 10% -5%
Case 2 15% 20% 12% 10% 2%
Case 3 11% 10% ? 10% ?
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21. COMPUTING REAL RETURNS
Pre tax Tax Post tax Inflation Real
return slab return return
Case 1 7% 30% 5% 10% -5%
Case 2 15% 20% 12% 10% 2%
Case 3 11% 10% 10% 10% 0%
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22. +ve real • You are creating
return wealth.
Zero real • You are preserving
return wealth.
-ve real • You are destroying
return wealth.
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23. Positive real return (+2%)
Negative real return (-2%)
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25. To even stay at the same place, you need to run very hard!
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26. ?
Vadivelu, Tamil comedian 1
8 4 2
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27. ?
WANTED!... One
crore rupees urgently
8 4 2 1
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28. I am financier. Tell me, tell
me, tell me man…
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8 4 2 1
Goundamani, Tamil
comedian
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29. Only 1 crore, for one year.
Pl help me ya…
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30. 1 year?... No problem.
? But repay 1 crore rubees for
12 months!
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31. @@###((())))!!
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32. He’s always like that. Don’t
worry. I’ll help you.
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Senthil, Tamil comedian
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33. Thank you. Only 1 year!
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34. 1 year?... No problem
I will take just 1 paisa…
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35. ????!!!!!!!!
?
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36. Just 1 paisa… but to double
every week up to 52nd week!
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37. How much will that be???????
1, 2, 4, 8, 16…..?
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38. How much????
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What’s your guess?
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39. Just Rs.4,50,35,99,62,73,705 .
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It is just 45 lakh crore. Was your guess anywhere near?
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40. Shut up your
? mouth, stupid non-
sense idiot.
Rascals…
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41. ?
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42. Senthil, the clever
man
Goundamani, the other
man
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43. ?
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Guess what worked for Senthil?
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44. Basic # 3: COMPOUNDING
EIGHTH WONDER OF THE
WORLD.
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45. ?
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How to plan financially for retirement?
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46. Regular Investments during
working life build up
retirement fund .
Accumulation
Retirement Fund Phase
Retirement Fund
Consumption
Phase
Regular withdrawals made
from the fund after
retirement.
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47. How?
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48. How?
Possible sources of income during retirement…
Pension / Annuity
Rent
Dividends
Interest
Reverse Mortgage
Employment / Business / Profession
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49. How?
Possible expenses during retirement…
Essential Not essential
• Food, shelter, • Gifts.
clothing. • Functions /
• Medical. celebrations.
• Travel. • Asset
• Power / replacement.
telephone. • Charity.
• Hobbies.
• Travel.
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50. How?
Important considerations while planning for retirement…
Present cost • Your current lifestyle and cost of living.
Retirement Age • Expected or desired age of retirement.
Future Cost • Your life style and living cost on retirement.
Life Expectancy • Your likely age of living.
Time • Years to retirement.
Assets • Assets that can produce income or can be liquidated
Surplus • Your current surplus that can build retirement fund.
Risk • Your risk profile and return on investment.
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51. How?
How to plan the accumulation phase of retirement…
DETAIL VALUE REMARKS
CURRENT AGE 30 Years
PLANNED RETIREMENT AGE 60 Years
LIFE EXPECTANCY 85 Years ASSUMED
CURRENT ANNUAL LIVING
Rs. 1,20,000 Rs.10,000 p.m
EXPENSES
EXPECTED ANNUAL
Rs.12,07,519 Inflation assumed @ 8% p.a
EXPENSES ON RETIREMENT
RETIREMENT FUND NEEDED Rs. 3,01,87,971 Assuming real return of 0%
MONTHLY INVESTMENT
Assuming investment return of
NEEDED TO ACHIEVE Rs.8,809
12% p.a
RETIREMENT FUND
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52. How?
Where can you invest before retirement…
PF
Bonds Gratuity
Accumulation Bank
Shares Phase
Deposit
Mutual Postal
Funds Savings
Pension
Plans
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53. Fixed Income Assets
For the short term.
Dependable.
Provides stability to the
portfolio.
 Predictable & Stable return.  Poor inflation protection.
 Good liquidity & cash flow.

54. Equity Assets
For the long term.
Your match winner.
Provides growth.
 Excellent wealth creator.  High volatility.
 Good liquidity.

55. Precious metals
For medium to long term.
Works best during crisis.
 No regular cash flows.
 Good wealth preserver
 Needs storage.
 Good liquidity.
 No productive use.

56. Real Estate
For the long term.
Erratic performance.
Utility and investment.
 Illiquid and high outlay.
 Good wealth preserver  Legal & practical hassles.
 Prestige & security.  Performance varies.

57. ?
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Should you take risk with retirement investment?
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58. Credit
Volatility Liquidity
Legislati
Inflation
on
Risk
Concentr Reinvest
ation ment
Geograp Systema
hical tic
Non-
systemat
ic
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59. Return Risk
“Risk free” investment is a
myth.
Risk is inevitable. Understand,
respect and handle it
wisely..
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60. How?
The biggest problem… Your capital gets eroded over
time and could get exhausted.
Replenishment of capital .
Retirement Fund
Regular withdrawals made .
You need to replenish your retirement fund by earning positive
real return on your investment.
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61. “Risky” investment
to fund non-essential
expenses.
“Safe” investment to
fund essential
expenses.
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62. How?
How to plan the consumption phase of retirement…
DETAIL VALUE REMARKS
PLANNED RETIREMENT AGE 60 Years
LIFE EXPECTANCY 85 Years Assumed
ACCUMULATED RETIREMENT Built up in the accumulation
Rs.2,60,00,000
FUND phase.
EXPECTED RETURN ON
INVESTMENT DURING 10% Assumed
RETIREMENT
EXPECTED INFLATION
8% Assumed
DURING RETIREMENT
EXPECTED REAL RETURN 2% Expected return minus inflation
POSSIBLE ANNUAL What you can consume without
WITHDRAWAL FROM Rs.13,05,619 the risk of exhausting your
RETIREMENT FUND money in your lifetime.
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63. How?
Investment options after retirement…
Bank
Deposit
Reverse Postal
mortgage Savings
Consumption
Phase
Pension
Bonds
Plans
Mutual
Funds
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64. When?
When to start
planning for
retirement?
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65. When?
Ideally, with your first
income… because, you can
benefit from the magic of
compounding…
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66. When?
?
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67. When?
?
Starting early enables you to
take more risk… with
potential for higher returns.
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68. When?
?
Starting early reduces your
burden.
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69. Reverse mortgage... The new option.
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70. Reverse mortgage details...
• It is the opposite of regular
?
mortgage.
• You should be above 60 yrs
and spouse above 55 yrs for
a joint loan.
• Option of regular or lump
sum payment or line of credit
or a combination.
• The house should have
been acquired and occupied 8 4 2 1
by you.
Contd…
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71. Contd…
Reverse mortgage details...
• After your and spouse’s life,
heirs can pay back the loan
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and take possession. Or the
bank will auction the property
to recover dues.
• Eligible up to 70% of the
house value.
• Loan amount depends on
value of house, age and
prevailing interest rate 8 4 2 1
• House to be revalued every
5 years.
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72. Contd…
Reverse mortgage details...
• Payments received will be
capital receipts and not
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taxable.
• Usually 20 years tenure.
Some offer annuity for life.
• Limited recourse. Your
liability will not be more than
the value of your house.
• Use of funds for speculation
or business not allowed. 8 4 2 1
• Pre-payment of loan
allowed at anytime without
penalty.
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73. Some common misconceptions about retirement planning…
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74. Misconception # 1…
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• It is too early to think • No, by starting early
about retirement…. your burden is
8 4 2 reduced and your
1
task becomes easier.
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75. Misconception # 2…
?
• I have other • Retirement is also an
commitments before important commitment.
retirement… 8 4 It may otherwise
2 1
become too late.
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76. Misconception # 3…
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• I have bought • Not enough. You
pension plan. So I need to ensure the
8 4 2 1
don’t have to worry… pension plan will
provide you sufficient
pension.
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77. Misconception # 4…
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• I can always catch • Do not postpone.
Your burden will be
up later…
8 4 more and you may
2 1
not achieve enough.
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78. Misconception # 5…
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• I will manage some • Take control.
how… 8 4 2 1
Leaving it to fate is
not a wise decision.
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79. Other important considerations…
• Write and update?your will
regularly.
• Purchase adequate health
insurance early in life.
• Have joint accounts with
spouse.
• Clearly provide nominees
for your investments.
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80. To conclude…
Failing to plan…
May well be planning to fail.
Plan now for a happy and
care free retirement.
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81. Thank you!
And wish you a happy and dignified retirement.
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82. Created and issued in public interest by:
V.Sreekant, B.E, MBA, CFPCM.
CERTIFIED FINANCIAL PLANNERCM
Freelance Author & Trainer
MoneyCare Solutions
WE CARE FOR YOU
More about Sreekant here.
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Disclaimer: The purpose of this presentation is only to educate the viewers of the concepts and
principles of personal finance. This is not an advice or recommendation on any financial product or to
decide / act or refrain from deciding / acting in any particular manner. Viewers are strongly urged to
seek professional guidance before deciding / acting on financial matters.
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