One of these statements is false. Guess which one.
1. 21% of the population of Netherlands lives below sea level.
2. Watermelons can be cubical in shape.
3. In a pack of cards, the king of spades has no moustache.
4. I will earn an income till I am 100 years old.
Ready with your answer? What is it? No.4? Are you sure? Well, hold on to your answer and you can check it as you read this story.
Well, actually this is not at all a story. It is a hard and true fact. As true and certain as Death and Taxes.
So imagine you are 30 years old, single, income of Rs. 30,000 per month. All your needs and expenses are managed within this; in fact, you are saving about Rs. 5,000 every month which you will invest to use later as you get married, your family grows and responsibilities (and expenses) go up. All is well. You are happy.
As you get older, when you reach 45, you realize you have forgotten something. You try hard to remember what that is, but no, the damn thing is hiding somewhere inside your head but not coming out. You scratch your head, bite you lips, even turn upside down – nothing.
Then suddenly one day you hear the word “Retirement”, and you get it! “My income will stop after 15 years, what am I going to do after that??? There is hardly anything left even for today. Whatever little I try to do now, will it be enough at all? If I retire at 60, I will need money for me and my wife for the next 20-25 years! And things will be so expensive then. Aaaaaaargh! Had I only planned this earlier!”
Stop. Imagine God gave you a second chance. Rewind. All the way back till you are 30 again. I’m now going to show you how you can make it work much better this time.
Every Rupee that you earn during your working life (till 60 or 65), is NOT for your working life alone, but for your retired life as well.
- At age 31, you can use only 87.29% (~87%) of your income and invest the balance 12.71% (~13%) to create income to be used when you are 66 years old.
Why 87% and 13%? Check the figure below, and it will be clear.
- Use the 87% for expenses of your working life – regular expenses, investing for children’s education and marriage, all other expenses till 65.
- To buy what you could with Rs. 87 when you were 31, when you reach 65, you will need a whopping Rs. 671 @ 6% inflation every year! Where will this come from???
- This is where the Rs. 12.71 that you invested when you were 31, will help. If you get returns @ 12% (post-tax) on that for 35 years (Mutual Funds and ULIPs can give you that), its value will become Rs. 671! And this will take care of your expenses in year 66!
So the income you earned in your 31st year is actually not for one but for two years – 31st (87%) and 66th (13%)!
Not just that, because of Inflation they are both worth the same – Rs. 87 in your 31st year can buy you the same things worth Rs. 671 in the 66th year!
In your 32nd year, if you again invest 13% of your earning, the workings will be exactly the same and you will be able to generate the required income for year 67. In your 33rd year, if you again invest 13% of your earning, you will be able to generate the required income for year 68.
… and so on…
In your 65th year, if you again invest 13% of your earning, you will be able to generate the required income for year 100! … and this can go as long as you are earning.!
It’s like magic! Magic through awareness, magic through investment discipline!
I know that putting aside 13% (or at least 8-10%) of your income every year for your post-retirement expenses is not easy, but it is a necessity. There are many who are already doing it, even if they have to curtail some wasteful expenses of today. If you haven’t started already, you are putting your retirement life to risk. And the later you start, you will have to put in disproportionately higher!
Time to conclude now. Going back to the same question I asked you in the beginning – which one below is false?
1. 21% of the population of Netherlands lives below sea level.
2. Watermelons can be cubical in shape.
3. In a pack of cards, the king of spades has no moustache.
4. I will earn an income till I am 100 years old.
Now you know it is not 4 – I have planned my income till 100! The false statement is No.3 – it is not the king of spades but the king of hearts that does not have a moustache. And yes, Netherlands comes from ‘Nederland’ meaning ‘low-lying land’, and cubical watermelons are easier to stack!
Friend, no problem if you got that wrong. Just get your retirement planning right – you get only one chance in a lifetime! Start NOW!
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Superb concept. What an idea, sirji! :))) haha
this article increases awareness about investing for retirement stage. very interesting style. thanks mintwise.
Superbly written article. message bahut clear hai.. shukriya.
very nicely explained. but i think it is difficult to actually do it. at least we know how to do it. good article, sir.
very nicely explained. but i think it is difficult to actually do it. at least we know how to do it. good article, sir.
Good question. There are lots of avenues to invest if you look for them. And whatever your income, and whatever your profile there is a solution. It all depends on your goals, your risk appetite and your attitude (and discipline) towards investment.
Good question. There are lots of avenues to invest if you look for them. And whatever your income, and whatever your profile there is a solution. It all depends on your goals, your risk appetite and your attitude (and discipline) towards investment.
OK to read….but where to invest?? the solution…
OK to read….but where to invest?? the solution…
Gud article with proper explanation.
Gud article with proper explanation.
nicely explained sir.
nicely explained sir.
Wow! Awesome concept!!!! Got to do something about my retirement now….cheers and thanks guys!
Wow! Awesome concept!!!! Got to do something about my retirement now….cheers and thanks guys!