Retirement Planning for armed forces Officers

Divesh Kumar has recently retired as a contended man. He hasfulfilled his duties as a devoted father, caring son and loving husband all his life. He now wants to gift something long lasting for his two lovely grandchildren which he and his wife fondly dote on. They both decided to contribute for higher studies for them by contributing some money every month. Their first impulse was to save in a bank Recurring Deposit (RD) but wanted their decision to be validated by us. We heard them out and asked them, “Have you thought of mutual funds for this purpose?” They never had thought so. We explained to them that they had a long time frame for their gift. The gift should actually work for the recipients to create value as they have planned and not be lost to inflation and taxes. In case of any emergent requirement some time later, ...

One of the most common mistakes done by most of the retired or recently retired persons is to put majority of their money in same or similar investment avenues, like bank FDs, real-estate, Gold, Post Office instruments, etc. All eggs in one basket is never a good mantra to follow whether it is physical eggs or retirement nest-egg! The article below deals with this aspect as also the eroding effect that inflation has on the retirement corpus. A 4-step strategy to be followed is also suggested for living a golden retired life. The basic issue is to plan well, execute well, monitor well and thus, LIVE WELL. (please enable ‘Display Images Below’ in your browser to see the newspaper clipping) Visit our Blog, https://humfauji.in/blog or facebook page http://www.facebook.com/HumFaujiInitiatives or follow us on Twitter  https://twitter.com/#!/humfauji  to get latest insight on matters financial ...

Government guaranteed pension, inflation-beating returns from safe investment schemes, low rate of inflation and the comfort of a joint family - all these four pillars on which retirement planning rested earlier, have disappeared. Recently retired or tomorrow’s retirees will need to balance high expenses with uncertain returns on their invested capital, longer lifespan with ever looming dangers of outliving their accumulated retirement corpus, and an urge to hang up their boots early. And all this, without wanting to compromise on their lifestyle at any stage – while working or when retired. The actual big challenge for retirees comes from an enemy which is not easily recognized - inflation. Just as compounding works to grow your corpus, inflation eats away at its value without your knowledge. A retirement corpus of Rs 1 crore may seem like a lot of money today but over 30 years, an inflation of 8% can reduce ...

My article in Times of India today (01 July 2014) on Retirement Investing Please find attached below my article in the Times of India of today (01 July 2014 – financial planning page). It is regarding how most of the retired or retiring people invest their retirement corpus considering ‘safety of capital’ as the prime criterion, only to discover few years down the line that their capital has lost its purchasing power due to the twin onslaught of inflation and tax. A carefully made portfolio, which finely balances risk, returns and balance liabilities, while ensuring that the standard of living does not go down throughout the lifetime of the last surviving spouse, is the best way to go about such an investment. Also, such investments cannot be a fire-and-forget solution – they need to be invested, monitored and re-balanced if required at regular intervals. (please enable your 'view images' in ...

I had written about Tax Free bonds a month back on my blog (read: https://humfauji.in/blog). There were many queries on the same. Hence, I felt the need to clarify some more on these tax-free bonds. In the meantime, the current crop of tax-free bonds on the block have improved in returns over the ones available earlier a month back, thus making them even better in their offering. The additional points that make these bonds attractive for the retiring and the retired persons are as follows:- The returns are even better now. Consider the table below for the Power Finance Corporation (PFC) bonds: Individuals Retail (UPTO Rs 10 LACS) TAX FREE Coupon TAX BRACKET 10.30% TAX BRACKET 20.60% TAX BRACKET 30.90% 10 Years 8.43% 9.40% 10.62% 12.20% 15 Years 8.79% 9.80% 11.07% 12.72% 20 years 8.92% 9.94% 11.23% 12.91% Individuals HNI (More than 10 LACS) TAX FREE Coupon TAX BRACKET 10.30% ...

Retirement marks the beginning of a new phase in an individual's life. It's a transition from a lifetime of work to a time when one can relax, spend time with the family and pursue other interests, which somehow take a backseat when on a regular job. Not only this, retirement also marks a transition in one's finances. With a regular stream of income no longer available, the savings made over one's working years now have to provide for all his needs. Even if one decides to go in for a second career (eg, in case of Defence Officers who retire early or others who may find another job in private sector due to skills acquired during working life), it will be for a limited period of time till, say, 60-65 years of age. Taking a life-expectancy of 85 years, there are still 20-25 years of non-earning life to be lived, ...

There are any number of websites, articles and experts extolling the virtues of realigning your asset allocation to ‘safer’ avenues as one inches towards his retirement. Some go to the extent of advocating a 100% debt portfolio the day one retires. Many arguments are advanced in favour of this shift – emotional ones (‘need to protect one’s life-long savings’), pseudo-logical ones (‘cannot afford to lose even a single paisa now as the earning are much reduced while expenses only rise’) and even medical reasons (‘cannot afford to have another stress-point in old age’). But the truth actually lies far away from these appeals. Let us look at the arguments that dictate that we should actually move towards lower safety instruments to ensure that we remain financially safe!! The biggest threat to the retirement corpus, painstakingly built up over the years, is inflation and income tax. Inflation eats into the purchasing ...

Normally, it is assumed, erroneously of course, that getting a proper financial plan made from a Financial Planner is the recourse of only the rich – “if I don’t have a ‘lot of money’, what financial planning can be got done?”. But look at it from another angle – because one doesn’t have a ‘lot of money’, there is an immediate need to plan so that it gets allocated to only those financial goals which are important for the well-being of own-self and own family! This is what Suresh Sadagopan in the article below tries to convey. Is financial planning only for the rich?  It is nothing to do with being rich or poor. It all boils down to how seriously one takes one's own future. I don’t have money, what planning can I do? This is a common refrain I get to hear. These same people often tell me ...

Prashant Jain is one of the most respected Mutual Fund managers in India. In a recent article, “Its Tomorrow That Matters”, he makes out a very persuasive case for investing in equity-linked products NOW. By giving behavioural, fundamental and philosophical aspects of equity investing, he asserts that this is the time to invest in equity linked products like diversified equity mutual funds. Some excerpts of the same article are given below in point form for easy assimilation. To download the full article, use the link http://poweraxis.com/projects/emailer/hdfcmf/2012/may/6/pdf/its_tomorrow_that_matters_prashant_jain_hdfcmf.pdf   Good returns are seldom made on investments made in good times. Rather, Good returns are typically made on investments made in adverse times. 1. Look at the performance of investments made in stock markets at different times:- Table A: Performance of Investments made in good times Time Sensex Level 1 yr forward P/E Main news / reason Total returns after 3 yrs Total ...

Guaranteed pension, assured returns from government schemes, relatively low inflation and the security of a joint family - all the four pillars on which has previous generation’s retirement planning rested, have either gone or will disappear soon. Tomorrow’s retirees will balance high income with uncertain returns, better means of capital appreciation with longer lifespan, and all new earning and career options with an urge to hang up their boots early. And all this, without wanting to compromise on their lifestyle. The other big challenge for retires comes from an enemy that is both stealthy and relentless - inflation. Just as compounding works to grow your corpus, inflation eats away at its value. The sum of Rs 1 crore may seem like a lot of money today but over 30 years, an inflation of 8% can reduce its equivalent purchasing value to less than Rs 10 lakhs of today!! And to ...