Series: Retirement Series

09 Mar 2021
Stairway to Heaven - Put it all together

Chapter:15 | Stairway to Heaven – Put it all together

As more time passed, AK and Rajesh became more and more informed about their own personal finances and over time put all the basics as taught by Pranav in place. Despite some resistance from within family and friends’ circles on their biases and ‘their own version of investing’, they remained steadfast on the path of financial well-being.

AK was the first to retire. He had already put his plans of re-employment aside for the time being. His favourite quote nowadays was: ‘Let me first discover the world as it has been waiting for me for a long time to explore’! He was now contemplating a break for a few months to declutter his financial and family affairs and then have a world tour for a few months. Taking a little inspiration from both Rajesh and Pranav, he too was now planning to either pick up a corporate job or work on social causes he believed in.

Over the next few weeks, Rajesh and Pranav also retired. Rajesh was to join his new workplace in next one month in another city. Pranav on the other hand, had already started spending more time in the NGO he had planned to work with.

The golf sessions had now turned into longish gossip and chat sessions. As Rajesh would be relocating to a new place and AK too would be spending less time in their current city, it was a farewell of sorts. Their schedule of playing golf and then having a good coffee-cum-chat had been in place for over 5 years now.

“We have known each other for so long, but isn’t it strange that we started talking about the most important things only in the past few months,” AK said, referring to the entire personal financial discussions they had. “To be fair to Pranav, he used to give us small advice of prudence from time to time, but unfortunately we were too consumed in our own affairs to take heed,” he added, smilingly.

Rajesh acknowledged what AK had just said, and added that the learnings will have huge benefits for him and he was also certain that his kids will reap the bounty. “I am happy that even my kids have now started investing even though they are just in their late twenties and early thirties. With the kind of time on their hands, I have a feeling that they will be happier and more satisfied than even Pranav,” he joked.

Taking the joke further, Pranav said how he was envious that he himself learned all about personal finance only in his forties. “Had I known all this in my thirties, I would have been playing golf with richer people, rather than you both!”

AK reminded the other two that he still needed to take care of his real estate till he finds reasonable buyers. “But I am certain that I will do that gradually without any pressure. Moreover, I am happy about the fact that my thought-process towards enjoying my own life has changed due to our discussions. Though it was tough, I have also been able to convince my wife on the same,” AK said.

They all agreed that retirement life without having to worry about random issues and more focussed on things that could give inner peace and happiness is something they will cherish. Moreover, they had now made it their aim to guide younger generations at home as well as work towards better personal financial management for friends and colleagues.

“It is surprising that so many people around us, including myself, end up making wrong investment decisions. Sensible investment habits need to be made a part of the training curriculum right at the beginning of one’s career, whether institutionally or personally,” he said.

Agreeing with AK’s point of view, Rajesh added that the availability of information is also a factor and that people of their generation cannot be completely blamed for the decisions they took in the past. “When we were young, the concept and availability of new-age instruments like mutual funds wasn’t heard of anywhere near us. Now that such simple and easy to use financial products are available, we will ourselves use them and ensure that our next generation knows about them and other aspects around investing as well,” he added.

Pranav couldn’t contain his happiness and was smiling all throughout the discussion. “I am really glad the discussions helped you and your families. I was afraid at times that I was boring you both,” he said.

“Having the right insurance, a good emergency fund, a practical goal-based financial plan, tax plan as well as an eye on the silent super-killer called ‘inflation’ is all that needs to be considered. Investments and asset allocation are the next important steps. However, for a Golden Retirement, the most important requirement is understanding the difference between wants and needs, and conquering the emotions of fear and greed,” he said, continuing, “and ensure that your kids and other young lads in the family know the basics from a young age. It is not just about starting investments early but also knowing what to start for – otherwise it will not be sustained.”

Rajesh proposed a family get together for the three families to which AK and Pranav readily agreed. “I only have one condition. Let us not turn that into a personal finance seminar,” Pranav jokingly said.

Gyan Collected

  • It is never too late to learn the basics of personal finance. On the other hand, the earlier we teach our young ones about this important aspect, the better it will be better for them.
  • It is important to be prudent and be aware of the impact that taxes and inflation can have on your wealth. They are normally missed out while they have the most adverse effect on our finances.
  • It all starts with understanding the distinction between wants and needs, and conquering our greed and fear.
  • Finally, we have to understand that Money may not be able to buy happiness and peace in life, but it can buy most other things!!
06 Mar 2021
Chapter: 14 | I believe I can fly - Getting into the civvy street younger

Chapter: 14 | I believe I can fly – Getting into the civvy street younger

After a very rejuvenating discussion the previous day, all the three friends, Pranav, AK and Rajesh, decided not to discuss anything about retirement today and concentrate on their reason for meeting there – a good round of Golf. They could do a full 18-hole course, which made the bright day even brighter.

The South Indian breakfast at the café seemed even yummier and they were enjoying dissecting their golf game today.

“Good morning Sirs, I’m Col Ramesh Kumar,” they had an unexpected visitor. Ramesh continued, “Sorry for butting in but I and my golf buddy, Sqn Ldr Sanjeev Singh, have been listening to your discussions for the past few days on retirement and today we thought we’ll take some benefit from your knowledge Sirs, if you don’t mind.” Sanjeev had also walked up and greeted them.

“Why not, sure Sanjeev. But be under no wrong impression – it is Pranav who is the knowledge fountainhead here and we’re just gaining from it. But first of all, why do you wish to know about retirement – you guys look so young, especially Sanjeev!” AK was surprised.

“Sir, we both have decided to move on – Sanjeev is a Short Service officer and leaving after completing his engagement with Air Force while I’m taking Premature Retirement (PMR). After initial dilemmas, we both have firmed up our decisions and now are looking for some gyan about what to do with the retirement corpus. I would be going into the corporate world while Sanjeev has decided to start an e-commerce company with one of his school friends.”

“That’s very nice Ramesh. While we can’t tell you anything about your next careers because none of has any idea about it, money management is something we have now become ‘experts’ at and can guide you, if that’s ok with you,” said Rajesh jokingly with a glint in his eyes.

Ramesh and Sanjeev pulled up the chairs and sat down next to them to get the pearls of wisdom. “Sir, we just need to know what to do with the money that will come to us since we are now going in from a secured environment to a truly topsy-turvy world?” Sanjeev enquired.

“I take it Sanjeev that you’ve heard some part of our conversations. Remember that the basic tenets of money management do not change. Whatever you do, it has to be run through three important checks – does it cater to your future financial requirements, is it as per your risk profile and comfort level, and does it take care of your emergencies if they ever strike you? Only when all three checks come out positive can you assume that you are on the right lines in investing your hard-earned money,” the professor in Pranav lectured.

Rajesh took up from here, “Obviously your children are young and would still be in school, you may or may not be having a house of your own, and you still have a long working life ahead of you. These three things change the dynamics of investing for you both, almost completely. You can take risks in your investments, you do not need much amount right now as your important financial goals are necessarily far away from now, and catering for emergencies like job loss or career changes are very important for you due to the trajectories you are getting into now.”

“Absolutely right Rajesh and well-said. So, you both have to first very carefully chart out your Income-Expenses matrix. And Sanjeev, this is much more important for you since you are getting into entrepreneurship which typically has long-payback periods and you need to be ready to have literally zero income for next 2-3 years at least,” AK said.

“There are primarily Six financial issues that you have to look for. Firstly, is the emergency fund which should be for 6-12 months of your requirements – 6 months for you Ramesh if you consider your job as stable and 12 months for you Sanjeev. This should be invested in a manner that it can support you and your family in case of any adversity.

Secondly is Life insurance which is of utmost important since you are out of fauji security umbrella. While a general thumb-rule of 7-10 times years’ gross income is thrown around, it should be based more on correct assessment of your assets and liabilities.

Third is Medical insurance. If the ECHS is not available or suitable for you for any reason, this again is a priority for you for the right cover amount.” Pranav emphasised.

“May I add the Fourth one as the Provident Fund (PF), whether PPF, EPF or some other PF as per your company norms, just like the DSOPF in fauj. This is your long-term money and should be taken out only for real long-term things, including at your retirement time,” Rajesh added.

AK, not to be left behind, butted in, “And don’t forget the all-important – Investments. This is the one which will take up your maximum money-time, and planning. This is the one which will enable you to meet your future financial requirements – your children’s requirements, buying or building a house, buy that aspirational car or go on the Europe trip, and many more such needs. So be very careful, take risk as due, neither less nor more, and as far as possible, keep your money liquid.” AK was actually quite impressed that Ramesh and Sanjeev were frantically trying to capture each and every word being spoken in the notes on their mobile.

“Then what is left as the sixth one, Sir?” Sanjeev asked.

“Retirement planning, my dear. That is of utmost importance especially to you since you’re leaving the fauj without pension and your entrepreneurial venture may not give you the stable income that you require after you decide to retire. Ramesh is getting out with pension and that would be very helpful and generally adequate when he decides to call it a day in his career,” Pranav added.

Ramesh was really grateful that he decided to approach this elder lot today. The knowledge that they both gained today was the clarity that they both had been struggling with for many months. He and Sanjeev thanked them all for sparing this time for them and also extracted their phone numbers and promises that they can contact them for further money advice if needed in future.

When they both were out of the earshot, Rajesh winked at AK, and laughed, “AK, did you realise that we both were the financial experts today, guiding these youngsters in money management. I can’t believe it, and they even took down notes verbatim of what we said!”

The financial experts’ gathering ended today on this happy note.

Gyan Collected

  • Everybody has different requirements as per his/her risk profile, future financial needs and what they have already done. While products advise can be generalised, financial planning requirements have to be customised.
  • The investment basket for younger persons could be vastly different from the older ones. Longer earning and investment time horizons increase the risk aptitude and capacity, implying that riskier assets can be acquired for better possible gains.
  • The Six issues brought out in the conversations above will never apply in the same manner to each and everybody. It should be intelligently interpreted as per own circumstances and followed through.
02 Mar 2021
I wanna hold your hand - What aspects matter more in life now?

Chapter: 13 | I wanna hold your hand – What aspects matter more in life now?

The impact of the discussions over the past few weeks was not limited to the three of them now. The discourse had reached a different level, with AK and Rajesh discussing several of their mutual discussions threadbare with their spouses and children. Issues, with much larger ramifications than mere investing also came up, like, what kind of life to live from now onwards, what contributes to an enriching retired life, should you create more assets, how much to be gifted to children, etc. This led to detailed debates between the financially newly-educated parents and carefree youngsters in their respective families.

Some issues also became contentious between AK, Rajesh and their respective spouses. Pranav’s ideas on minimising investment in real estate and gold was not easily palatable to the other people AK and Rajesh would discuss them with. This led to the trio discussing these things internally online in their chat group through the day as well as in their morning golf meets. As the discussions had become more serious and personal in nature than the previous informative and educational discussions, golf had already taken a back stage.

Today, AK seemed tense. Pranav and Rajesh made fun of the fact that AK did not have any work now since he was on LPR (Leave Pending Retirement). AK instantly opened up that he was battling with some other thoughts for the past few days. He narrated a gist of his discussions at home regarding various issues, which Rajesh also corroborated as discussions in his own family.

“This is very personal AK,” Rajesh said, “Do you really want our suggestions on this?” AK indicated that he indeed wanted to know what his two closest friends thought about this.

Pranav being the Professor in the group, the other two looked intently at him. “Well,” Pranav began, “I might become a deadly villain for your families if you continue to take my advice! I know they must already be furious at me for all that I have put in your heads,” he laughed.

“Jokes aside, I feel what is more important right now for all three of us is to finalise what do we want out of our lives, after having worked relentlessly for about 3½ decades. The way I see it is, none of us knows how much time we have left, and more importantly, how much time we and our spouses have together in this world!”

Rajesh chipped in, “Pranav, I also think a lot about it now. See, if I take 85 years to be our normal life-time, leave out last 10 years as inactive years when body does not physically allow you to do much and your mindset and priorities also change, I have about 20 years from now. I also do not know who – out of I and my wife – will outlive the other. But whatever happens, the spouse left behind should not feel that we should have led a better life together and we’ve missed out on that.”

AK butted in, “Rajesh, you’ve raised very pertinent points. Sometimes I really wonder what is more important to me now – physical assets like real estate and gold which others say I should take but my money gets locked in there and they do no accretions to our lives, or, go in for financial assets like FDs, Senior Citizens Savings Schemes, Mutual Funds, etc where one can regularly take out small or even big amounts and lead a Golden Retired Life?”

“Exactly the point I have been making AK for the past many days. We have to decide on these broader aspects of life now. And I’m very clear that, unless we have these out of our way, we will forever remain confused,” Rajesh added.

“I’m so happy AK and Rajesh that we’re discussing this today as it is the most important part of our retirement planning. Once we settle on this, rest of the things will fall in place by themselves. A very important aspect related to what AK has said is, whether we should create further assets – another house or plot of land, more storeys to your existing house, move to a bigger house? I feel that we should not now do any of this now. Our asset creation phase of life was long over when we crossed 45-50 years of age. What is more important is that we make our lives more enriching now, live like there’s no tomorrow – the concept of Golden retirement which I’ve mentioned so many times earlier,” said Pranav.

“No doubts or questions on that Pranav. But then, another point that comes up is of our succession. My wife says that we should give a house each to our two children as also give some part of the retirement bulk amount to them. I have my doubts because I somehow don’t agree with it,” queries Rajesh.

“Rajesh I too agree with you. We have all given our children the best of education and facilities and made them capable of standing on their own feet. Let them fly now. You have done your responsibility – let them negotiate their way through the world and learn its practical ways now, rather than be pampered all through still and become unfit to face realities of life themselves when you are no more around. Giving them something as big as a house would definitely affect our lifestyles, and if you ask your own children truthfully, they would never want to do that. Moreover, how do you know your children want a house in that location? We give them a house in Delhi while they may work all their lives in Mumbai, Pune or Bangalore, or even outside the country! What a pain would we be inflicting on them in maintaining a house, getting paltry rental, while not even getting to stay in it for better part of their lives,” opined Pranav.

“I think giving them money instead, is better. But why give a big part of your retirement corpus to them just to save some small tax when you’re still alive and kicking? It will all anyway go to them only when you’re doodling in heaven!” butted in AK humourously.

“I think we have discussed an essential part of the whole retirement game today. Frankly, I feel so light after that, mind all made up on what I need to do going ahead. Lots of cobwebs have been removed.” Rajesh looked joyous after this conversation.

“Even I think we all have realised today that what matters from now onwards is how to have a happy and fulfilling life. If it comes from playing golf, be it so. Charity, doing another job, starting own venture, helping spouse in the kitchen, starting a school in our native village – whatever is done should contribute to a sense of fulfilment and happiness. And it depends on each one – each to his or her own,” concluded Pranav.

They all got up, ready to go, little realising that tomorrow they will all be guiding some younger officers on how to lead a good retired life!

Gyan Collected

  • Don’t be an ATM to your children after retirement. If you do so and let go of your life-time savings, you will later depend on them financially for your life time.
  • Do not get into asset creations with your retirement funds. Keep them liquid to the extent possible so that you can make your life more meaningful.
  • Use your retirement corpus for your own life’s goals to bring abundance into it along with your spouse. Define it beforehand and stick to it. Don’t let anybody else’s agenda, including of your children and other relatives, get into it. Try to do things now which you always wanted to do but could not do due to career constraints.
  • The retired life should consist of actions that make yours and your spouse’s life richer. The definition of the same will vary from person to person but the final outcome remains the same – of enjoying oneself.