Wake up, Sid

wakeupMost 25 year olds have an aspiration to retire at the age of 40. They would like to spend their working life earning lots and pots of money, and bask in the glory of their previous earnings.

Also read : Tips to plan retirement

Lets take example of Sid, who is 25 years today and intends retiring at 40. Assuming he invests all his savings of Rs. 25,000 per month  at 12% p.a., he will accumulate a corpus of Rs. 1.25 crore at age 40. During this time, inflation of 6% p.a. will increase his expenses to Rs. 120,000 per month (see table). In the course of our workings, we tend to consider returns of just 1% p.a. over inflation in the post retirement phase. Even if Sid’s expense levels do not increase (which is unlikely once he has a family), and if he takes extra risks and earns 2% p.a. over inflation in his retirement days, the corpus will last under 10 years. It’s time to wake up, Sid!

Current Age

25 years

Retirement

40 years

Income

Rs. 75,000

Expenses

Rs. 50,000

Returns

12% p.a.

Inflation

6% p.a.

Corpus at Retirement

Rs. 124.90 lakh

Expense levels at retirement

Rs. 119,827

Return over inflation after retirement

2% p.a.

Number of years corpus will last

9.5 years

wake

Also Read : Retire rich with just Rs. 40/-

bb Posted with WordPress for BlackBerry

Advertisements

One thought on “Wake up, Sid

  1. Pingback: UTI emerges largest pension fund manager « V-Secure Investments

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s