This document discusses financial challenges and strategies for managing finances post-retirement. It identifies three main challenges: 1) inflation will cause expenses to double every 6 years, 2) taxes will be higher with fewer deductions, 3) discretionary spending tends to increase in retirement. To manage these, the strategies proposed are to 1) fix expenses and deposit only what is needed each month, 2) plan finances for 20+ years rather than just 12 months, and 3) select investments with the highest post-tax returns and less than 5-year lock-ins. The document provides tools to project expenses over 20 years and compare returns of different investment options.

1. Financial Wellness
Program
Managing Financial Challenges Post
Retirement

2. 2014
Income
• Pension : Rs 6000 per
month
• Retirement Corpus : Rs 40
Lakhs deposit in SBI Fixed
deposit
– 9% Interest  Rs 3,60,000 per
annum
– Or Rs 30,000 per month
• Total Income : Rs 36,000
p.m
Expenses
• Rs 30,000 per month

3. WHERE IS THE PROBLEM?
Income is more than the expenses

4. WHAT FINANCIAL CHALLENGES ARE
YOU ANTICIPATING POST RETIREMENT ?
Sheet 1

5. Challenge No 1
Inflation

6. Inflation + lifestyle ?
What is the impact?

7. Inflation + lifestyle Impact
Year Average Household Monthly Expenses
1920 Re.1
1940 Rs.10
1960 Rs.100
1980 Rs.1000
2000 Rs.10000
2020 Rs. 100000
2040 Rs. 1000000
2060 ????????
Approximate Information, based on Estimates Expenses are going at 12% per annum
CII – CAGR of 7.1% + lifestyle expenses like Mobile 3G, car replacement, etc...

8. Monthly Expenses will double every 6
years

9. Telephone Calls
Before 2000
5 Calls in Year
After 2000
5 Calls in an Hour

10. Clothes
Before 2000
Bought only for
After 2000
Bought whenever

11. Water
Before 2000 After 2000

12. Challenge No 2
Tax

13. Tax benefit comparison
Working life
80 C Benefits
EPF Deductions
PPF Deductions
Gratuity
HRA
Transport Allowance
LTA
Loss of Income from House
Property (Interest Paid on
housing loan)
Standard Deduction
Rs 2.5 Lakh
Retired life
Only Standard Deduction of Rs
3 lakh

15. Challange No 3
Increase in Discretionary Spending

16. Discretionary Spending 39%  59%

17. So many Discounts and offers
But, Nothing comes free
All schemes are designed to make
you poor

18. Combined effect
Inflation + Tax + Discretionary
Spending

19. Normal Food, Clothing, Shelter
Luxury Food, Clothing, Shelter, Car , Vacations
Super
Luxury
Food, Clothing, Shelter, Car+ Driver,
International Vacations
Year Normal Luxury Super Luxury
2014 रु 360,000 रु 720,000 रु 1,440,000
2015 रु 385,200 रु 770,400 रु 1,540,800
2016 रु 412,164 रु 824,328 रु 1,648,656
2017 रु 441,015 रु 882,031 रु 1,764,062
2018 रु 471,887 रु 943,773 रु 1,887,546
2019 रु 504,919 रु 1,009,837 रु 2,019,674
2020 रु 540,263 रु 1,080,526 रु 2,161,052
2021 रु 578,081 रु 1,156,163 रु 2,312,325
2022 रु 618,547 रु 1,237,094 रु 2,474,188
2023 रु 661,845 रु 1,323,691 रु 2,647,381
2024 रु 708,174 रु 1,416,349 रु 2,832,698
2025 रु 757,747 रु 1,515,493 रु 3,030,987
2026 रु 810,789 रु 1,621,578 रु 3,243,156
2027 रु 867,544 रु 1,735,088 रु 3,470,177
2028 रु 928,272 रु 1,856,545 रु 3,713,089
2029 रु 993,251 रु 1,986,503 रु 3,973,005
2030 रु 1,062,779 रु 2,125,558 रु 4,251,116
2031 रु 1,137,173 रु 2,274,347 रु 4,548,694
2032 रु 1,216,776 रु 2,433,551 रु 4,867,102
2033 रु 1,301,950 रु 2,603,900 रु 5,207,800
Average Annual Expenses for Retired Couple
Factors to be applied
Non Metro 0.75
Rented Home 1.3
Less than Rs. 5 Lakh
Health Insurance
1.1
Example:
Retiring Year : 2015 , Retiring age 60
Expected life : 80 years
Annual Expenses : 3,85,200
Corpus required : 20 * 3,85,200
= Rs 77,04,000
Assumptions – After retirement :
ROI = Inflation, current inflation = 7%

20. How to Manage
Inflation + Tax + Discretionary
Spending

21. Strategy 1 : Fix your expenses
1. Expenses will increase every year – We
can’t do any thing about it
2. Fix the expenses as per the table provided
3. Keep only minimum balance in Savings A/c
4. Set up Auto transfers and deposit only as
per your monthly expenses projected

22. Even if we want to spend less,
children/spouse/neighbour/relatives
will not allow

23. Lack of Self Control
Marshmallow Test
Research conducted over 40 years
Kids 6-10 years of age are asked to go to a room
where chocolate is kept and asked to wait for 15
minutes
If they resist 15 min without eating chocolate, they will
get 2
Every Kid wanted to have 2 chocolates
Guess how many walked with 2?
Just 1%
10 years later – same kids who walked away with 2
chocolates – got better grades in the exam
Another 10 years later – they had better jobs
Another 10 years later – they had better investments
What prevents us from being in that 1%

24. Herd Mentality
Who should I follow ?
My Boss
My Brother-in-Law
My Friend
My Neighbor
My Colleague
My Cousin
What ever is good for them is good
for me too ?

25. Year Available Expenses Invested Interest
2015 7704000 385200 7318800 512316
2016 7831116 412164 7418952 519327
2017 7938279 441015 7497263 524808
2018 8022072 471887 7550185 528513
2019 8078698 504919 7573779 530165
2020 8103944 540263 7563681 529458
2021 8093139 578081 7515057 526054
2022 8041111 618547 7422564 519580
2023 7942144 661845 7280298 509621
2024 7789919 708174 7081745 495722
2025 7577467 757747 6819720 477380
2026 7297101 810789 6486312 454042
2027 6940354 867544 6072809 425097
2028 6497906 928272 5569634 389874
2029 5959508 993251 4966257 347638
2030 5313895 1062779 4251116 297578
2031 4548694 1137173 3411520 238806
2032 3650327 1216776 2433551 170349
2033 2603900 1301950 1301950 91136
2034 1393086 1393086 0 0
Max Balance to be
maintained in Savings
A/c for 2015
3,85,200/12 = 32,100

26. Strategy No 2
Plan for next 20 years and not next 12
months

27. Case
Monthly Expenses : Rs 20,000
Corpus Available : Rs 35 Lakh
Let’s compare Annual Planning through FD’s
and monthly planning through MIS (Bank &
Post office)
Interest Rates
FD’s – 9.25% (2 year)
MIS – 8.3%

28. Cash Flow Statement with Annual Planning using FD’s
Years Monthly expenses
Corpus at the beginning
of the year
Amount kept for
Monthly expenses Amount invested Total Income Taxable income
0 20000 3500000 240000 3260000 309700 59700
1 21400 3569700 256800 3312900 314726 64726
2 22898 3627626 274776 3352850 318521 68521
3 24501 3671370 294010 3377360 320849 70849
4 26216 3698209 314591 3383618 321444 71444
5 28051 3705062 336612 3368449 320003 70003
6 30015 3688452 360175 3328277 316186 66186
7 32116 3644463 385388 3259075 309612 59612
8 34364 3568688 412365 3156323 299851 49851
9 36769 3456174 441230 3014943 286420 36420
10 39343 3301363 472116 2829247 268778 18778

29. Cash Flow Statement with Annual Planning using MIS
Years Monthly expenses
Corpus at the beginning
of the year
MIS Investment
required to meet
expenses
Balance investments
in FD Total Income Taxable income
0 20000 3500000 3000000 500000 287500 37500
1 21400 3547500 3210000 337500 288863 38863
2 22898 3579563 3434700 144863 288538 38538
3 24501 3593324 3586000 0 286880 36880
4 26216 3586000 3556000 0 284480 34480
5 28051 3556000 3500000 0 280000 30000
6 30015 3500000 3412000 0 272960 22960
7 32116 3412000
8 34364
9 36769
10 39343

30. Comparison – By annual
planning we will have Rs 2,20,00
more by end of 7th year – almost
equal to 1 year expenses
Hence by annual planning it is
possible to stretch the corpus by 2
more years in the next 20 years

31. Strategy No 3
Consider Post Tax Return on Investment
and select Financial Products which are
safe and offer higher post tax return with
lesser lock in

32. Comparison of Financial Products
Product Approx Interest Real Interest after Tax
(10% tax bracket)
Real Interest after
Tax (20 % Tax
Bracket)
Real Interest after Tax
(30% tax bracket)
Remarks
Bank FD 9.25% 8.35% 7.4% 6.5% Maximum 20 Lakhs
to be kept in Bank FD
Company FD 10% 9% 8% 7% If total amount
available is Rs 50
lakhs, then keep Rs
20 Lakhs
Post office MIS 8.4% 7.6% 6.72% 5.88% Suitable only for
those in 0% Tax
bracket
Sr Citizen
scheme
9.3% 8.35% 7.4% 6.5% Lock in 5 years,
normal FD better
Inflation
indexed bonds
Inflation
+1.75%
10% Tax to be
paid
20% tax to be
paid
30% tax to be paid 10 year lock in makes
it unattractive
Tax Free Bonds 8.5% 8.5% 8.5% 8.5% 10 year lock in makes
it unattractive
Fixed Maturity
Plans
8.5%-10% ~8% ~8% ~8% Very attractive for
those with more than
50 lakhs corpus
because of tax
benefits

33. Understand Return and calculate returns
yourselves
If money is doubling – Apply Rule of 72
72
---------------------- = r where n= No. of years taken to double money
n

34. Why Returns are important?
2014 100000
2022 200000
2030 400000
2038 800000
2014 100000
2020 200000
2026 400000
2032 800000
2038 1600000
Return on Investment – 9%
Years taken to double – 8 years
What happens to Rs 1 lakh investment
In 24 years
Return on Investment – 12%
Years taken to double – 6 years
What happens to Rs 1 lakh investment
In 24 years

35. OR
EVERY 3% DECREASE IN RETURN MAKES ONE POORER BY HALF
Every 3% improvement in Return doubles wealth

37. Interesting Schemes - Ignore
1. Pay Rs 50,000 for 10 years – Get Rs 50,000
for 100 years
2. Pay Rs 5250 per month for 10 years get Rs
10 Lakhs
3. Get Assured return of 12.5%

38. Tax Slabs
Income (inclusive of Rs
1.5 Lakh in 80C
Investments)
Tax Rate Min Tax Max Tax
Upto Rs 4.5 Lakh 0% 0 0
Rs 4.5-6.5 Lakh 10% 10% above Rs 4.5 Lakh Rs 20000
Rs 6.5 – 11.5 Lakh 20% Rs 20000+ 20% of
above Rs 6.5 Lakh
Rs 120000
Above Rs 11.5 Lakh 30% Rs 120000 + 30% of
above Rs 11.5 Lakh

39. Income exceeds Rs 6.5 Lakhs
Investing in name of Spouse
and minor children
- Interest income will be
clubbed and tax needs to
be paid
- Only interest on interest
will become tax free
- Cannot give Gift or
interest free loan to wife
But investing in the
name of Major
children will not be
clubbed

40. What income will be taxed?
• Pension Income
• Interest income from FD
• Rental Income
• Income from part time job
• Interest earned from FD invested in Spouse
name

41. Tax Optimizing Investment Pattern
Maximum Savings A/c Balance One Month Expenses (Rs 32,100)
Maximum Balance in Sweep in A/c One Year Expenses (Rs 3,85,200)
Maximum in Fixed Deposits Rs 45 Lakh (0 Tax)
Corpus above Rs 45 Lakhs In Lock in Debt Funds for 3 years (less than 5%
tax)

42. What if I don’t have sufficient corpus ?
Step 1 : Try to reduce expenses
Step 2 : Check if Tax can be reduced further
Step 3 : Take up a part time job
Step : 4 : Use Reverse Mortgage after 75 years of age

43. Remember, all investments carry
a Risk
Even FD’s

44. Invest only with Nationalised Banks

45. Financial Products – You may ignore
Product Pros Cons
ULIP None Unnecessary Deductions towards commissions
and Insurance Expenses. After Retirement No
Insurance is required
Post Office Savings No TDS Deductions
upfront.
Interest rate lower than bank FD’s
Debt Mutual funds Gives slightly better
return over FD’s
Complex Product. In case withdrawal during
emergency, there may be a loss
Inflation Index
Bonds
Better Tax adjusted
return
Will be blocked for long periods and cannot be
withdrawn in emergency
Tax Savings Bonds Better Tax Adjusted
return
Will be blocked for long periods and difficult to
redeem in emergency
PPF Better tax adjusted
return
Will be blocked for long periods and
withdrawal not possible

46. What to do with the Loans ?
Interest on FD – 9%
1. If Interest on loan is lesser than 9% - Keep the loan
2. If the interest on loan is more than 9% - Pay of the
loan immediately

47. Also Stay away from
• Real Estate Investments
• Stock Market Investments
• Any New form of Investments
– Unless you have started working again after
retirement

48. Is this True ?
Rising Education Cost
Best to way fund higher education is
through education loan
3 Reasons
Interest Repayment eligible for tax
benefit – Net Interest on Edu Loan
: 9%
If bank is not willing to give loan then
college is not good
Loan brings more seriousness
towards studies
Finally, Govt of India may waive of the
interest as they did this year
Rising Health Care Cost

49. Other important Matters
1. Have adequate Health Insurance so that your corpus does not
reduces due Medical expenses
2. Fund your children’s education only through education loan
3. Simplify your life and do all financial transactions online only
4. Consolidate all your financial assets for ease of management
–Max 2 Bank accounts
–Max 5 FD’s
–Analyze Returns on past investments and convert to cash on
reaching optimum returns
5. Have a will and update every year.

50. Keep all your financial information in
one Place
Keep it safe at home, known only to
spouse, in case of emergency
Update atleast once in a year

51. Summary
1. Track your expenses
growth every year
2. Do Annual Planning for
next 20 years
If retirement corpus starts
decreasing before 10th
Year, consult a Financial
Advisor.

52. Expectation from the Program – What we
heard from 3000+ Participants
Where to Invest so that I can get regular monthly income?
How do I know whether I have enough money?
What can I do if fall short of money later in my life?
What are the tax implications on my leave salary compensation ?
How can I save more tax after retirement ?
How to mange my children’s education expenses?
What do I do with my Home loan / Car Loan ?
How to manage health care cost ?
How to control my future expenses ?
Any other Expectations ?

53. For those who have more than
Rs 60 Lakh Corpus

54. If annual income is more than Rs
6.5 Lakhs – consider Fixed
Maturity Plans

55. WHAT BANKS DO TO FD’S
COLLECTED FROM INVESTORS ?

56. What Banks do with your money?
Pay 9% interest to you
Lend to others
Home loan – 10.5%
Car loan – 11.5%
Educational Loan : 13%
Personal Loan : 15%
Loan to companies : 16%
Finally, Loan to Govt of India

57. How much does Govt of India
borrow ?
There are other Govt. entities like
State Governments, Municipal
corporation, Different Govt
departments – Health, Education etc
?

59. From where does Govt of India get
Rs 15,000 cr every day?
•Banks
•Insurance
•Mutual Funds
•RBI

60. Lending Money to Government
•Through Banks (by FD) and Insurance
(policies)
–Net return : -1%
•Through Mutual Funds
–Fixed Maturity Plans
•Tax is 10% (before indexation) and not 30% as
compared to Bank FD

61. Which is better?
Personal Loan
Education Loan
Lending to companies
(like Kingfisher)
Lending to Govt

62. Consider Fixed Maturity Plans if
Corpus is more than Rs 60 Lakhs
Case 1 – Invest only in FD
Corpus : Rs 65 Lakhs
Invest all Rs 65 Lakhs in FD
Interest earned : Rs 6,17,500
Taxable Income : Rs 2,67,500
Tax on Income : Rs 27,000
Case 2 - Invest in FD and FMP
Invest Rs 37 Lakh in FD and Rs 28
Lakhs in FMP
Interest on Rs 37 Lakh : Rs 3,50,000
Capital Gain on Rs 28 Lakh FMP
Investment : Rs 2,52,000 (@9%)
Tax on Interest Income : 0
Maximum Tax on capital gain : Rs
11,200
Tax Savings of Rs 16,000/=