Posts Tagged ‘Retirement’

Take Control Of Your Golden Years Financial Planning Final Part:)

Continuing the final part 🙂

Sumit’s colleague, Ankit, who is 30 years old, commences his retirement planning at the same time. Given that he also aims to retire at the age of 60 years, he has an investment horizon of 30 years. Assuming, like Sumit, he invests Rs 50,000 every month @ 10% per annum, he will accumulate Rs 11.30 crore at retirement. On the same lines, Piyush, Sumit’s other colleague, commences investing at the age of 35 with an investment horizon of 25 years to accumulate Rs 6.63 crore at the age of 60 years (at Rs 50,000 per month @ 10% per annum).

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Given that all three of them have the same monthly investment (Rs 50,000), which is invested at the same rate (10% per annum), the difference can be attributed completely to Sumit’s early start vis-à-vis his colleagues. Ankit who has an investment tenure that is lower than Sumit’s by only 5 years accumulates a corpus that is nearly 40% lower than Sumit’s. Piyush, whose investment tenure is lower than Sumit’s by 10 years, accumulates approx 65% lower than him on retirement. A 5-Yr delay in retirement planning sounds like a small difference, but the power of compounding magnifies it to gigantic proportions.

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CHALK OUT YOUR CORPUS 🙂

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You’ll have to keep a realistic goal that you can realise in the time you have. Don’t expect that the zeroes will multiply automatically in your savings. See how much you can afford to save every month. Of course, if you start at a late age you will have to increase your savings substantially, so cut down on any superfluous expenses.

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Prepare a budget which lists what you spend on necessities so that you know how much your monthly/annual expenditure will be in the future. Account for inflation too. Keep a rough estimate of 7-8% inflation every year. Also, consider expenses that are bound to increase, such as medical and transport expenses. Then again, calculate the expenses that may cease to exist, such as your children’s education.

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DON’T TOUCH THOSE SAVINGS

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More often than not, people have combined savings, that is, they save money for all their financial goals together— retirement, children’s education, their marriage, buying a home, etc. Invariably, you spend more on your initial financial goal and end up depleting your savings. By the time you retire, you have barely any money left. Overcome this obstacle.

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Build your retirement corpus separately, and do not touch it. It’s always better to earmark the time period for your goals and make separate portfolios for each of these goals. For instance, your children’s education may be a short-term goal (compared with retirement, that is). Since retirement is a long-term goal, if you are starting early you can afford to take risks and invest primarily in equities. But if retirement is a short-term goal, that is, only 5 years away, you won’t be able to take any risks. You’ll be more concerned about security. In that case, invest primarily in debt instruments.

MAKE A PLAN

Before you embark on saving for retirement, you must have a plan in place. While a plan may sound fancy and even intimidating, rest assured it is not all that complicated. Your retirement plan is simply your wish list of how you wish to spend your twilight years. Among other expenses, when you plan for retirement, you must make it a point to set aside money for medical expenses and contingencies, as any retirement plan without them is incomplete.

While you have to decide how you wish to lead your life in retirement, your financial planner will help  you translate that dream in numbers. He will put a number to everything i.e. your dream house, vehicle, post-retirement income, medical expenses and contingencies among other inputs. He will tell you how much you need to save and where to invest your savings so as to achieve your retirement corpus. In other words, he will outline a roadmap and more importantly, will implement the same for you.

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TRACK AND REVIEW YOUR PLAN

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Once the plan is outlined and implemented you have to still ensure that you are on track at all times to meet your targeted return at the desired level of risk. This calls for a periodic review of your investment plan. Over time as you approach retirement; reduce allocation to risky assets like stocks and/or equity funds in favour of more conservative avenues like fixed deposits.

The future is closer than you think. Pick targets early and give them the right kind of support to take control of those golden years.

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For any financial planning queries, email us at financialplanning@smcwealth.com

Building your Financial Future After a Divorce

financial-planning-after-divorce

You need to do long term financial planning when you are going through a divorce. It’s important that you recover from the split by assessing your situation as singles and setting up new financial plans with a focus on longevity. Here are five simple steps for building your financial future after a divorce:

1. Start with a plan.

Take a look at your finances before the divorce and then subtract what you’ve lost to give you a good perspective on your fiscal situation. Be realistic with yourself and set a budget that you can easily manage with your new single status.

2. Check your credit.

Maintaining your credit is an important step in walking away from a divorce financially intact. Examine your credit reports and ensure that any name changes or card closures are accurate and taken care of.

3. Ensure your retirement.

Confirm that all of your retirement arrangements are intact and that any assets or funds you are entitled to have been taken care of. Division of savings and accounts should be paramount in your review.

4. Obtain the necessary insurance.

Examine your insurance policies and make sure that you and your property are still covered.

5. Review your taxes.

Understanding the tax ramifications of your divorce is a key part of planning for your financial future. Confirm that all tax responsibilities between you and your spouse are coordinated appropriately.

Consumer Confidence In India?? Excellent & On Upswing ;)

Indian COnsumers Most Confident

Despite below average monsoon, INDIA has emerged as the second most optimistic nation across the world in terms of consumer confidence level.

Majority of people have expressed their positive opinion about job prospects, personal finances and their willingness to spend in the next 12 months. 🙂

A survey conducted by global consultancy firm Nielsen throws light in this regard.

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According to the survey, consumer confidence in India is on upswing, registering a 13-point rise to 112 index points in the second quarter, second only to Indonesia (113 points).

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“The recent elections in India have had a positive effect on Indians’ sentiments towards its economy.

With the UPA government back in power for the second-term, consumers are more confident that political and policy continuity will help recover the Indian economy,’’

🙂

The consumer confidence in India witnessed an uptrend on three parameters—

Job Prospects,

Personal Finances and

Willingness to Spend.

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In terms of job prospects, Over half of Indian consumers are optimistic that job prospects will either be excellent (13%) or good (55%) in the next 12 months.

India ranked second after Indonesia in this regard. 🙂

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When it comes to spending habit, about 4% Indians think this is an excellent time to buy the things they want and need, and 39% think it is a good time to buy things.

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Regarding personal finances, Indians are the most optimistic globally as about 9% of Indians think their personal finances would be excellent in the next 12 months and 65% consider they would be good.

🙂 😀

“A stable economy has refurbished Indian outlook on the job market and their personal finances. Indians are relaxing their hold on money and are spending more than they were willing to spend in the last eight months,’’ an expert from Neilsen quoted.

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However, more or less consumer sentiments are positive all across the world, with the Global Consumer Confidence Index, rising to 82 points from 77 points in March.

😀 🙂

Despite below average monsoon, India has emerged as the second most optimistic nation across the world in terms consumer confidence level, with a majority of people having bullish opinion about job prospects, personal finances and their willingness to spend in the next 12 months, a survey conducted by global consultancy firm Nielsen, said on Tuesday.

According to the survey, consumer confidence in India is on upswing, registering a 13-point rise to 112 index points in the secondquarter, second only to Indonesia (113 points). “The recent elections in India have had a positive effect on Indians’ sentiments towards its economy. With the UPA government back in power for the second-term, consumers are more confident that political and policy continuity will help recover the Indian economy,’’ The Nielsen Company associate director (consumer research) Vatsala Pant said. The consumer confidence in India witnessed an uptrend on three parameters—job prospects, personal finances and willingness to spend. In terms of job prospects, India ranked second after Indonesia. Over half of Indian consumers are optimistic that job prospects will either be excellent (13%) or good (55%) in the next 12 months.

Regarding personal finances, Indians are the most optimistic globally as about 9% of Indians think their personal finances would be excellent in the next 12 months and 65% consider they would be good.

“A stable economy has refurbished Indian outlook on the job market and their personal finances. Indians are relaxing their hold on money and are spending more than they were willing to spend in the last eight months,’’ Pant said. When it comes to spending habit, about 4% Indians think this is an excellent time to buy the things they want and need, and 39% think it is a good time to buy things.

Globally consumer sentiments are positive, with the Global Consumer Confidence Index, rising to 82 points from 77 points in March.

Shape your child’s future through MF investment

child investement plans

Retirement and children’s education are the biggest worry of young parents in metros these days. 🙂
Financial advisors say most queries they receive are related to these two crucial issues.

It is rare to find a parent who hasn’t thought of or bought a children’s insurance plan.

🙂

Children’s education is one of the top priorities of urban couples these days. They rightly believe education will be a costly affair, especially if the kid wants to study abroad.

However, when it comes to planning for the event, only some get it right. Most people buy the wrong products without realising that they won’t be able to achieve their goals.

Wrong products may range from fixed deposits and public provident fund to insurance plans.

Interestingly, these experts are unanimous that the equity route, especially via mutual funds (MFs), is preferable to fund the child’s long-term needs.

🙂

We get long queries from parents who want to plan for their children’s future. Though many people opt for insurance products, there are several others who go for mutual funds,’’ says an expert.

“We ask them to take the equity route generally if it is a newborn baby or a very small child. This is because they can benefit from the possibility of higher returns and power of compounding during the accumulation phase,’’ he adds.

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There is a number of schemes in the equity domain. How does one go about it?

For example, you have the option of large-cap funds, mid-cap funds, diversified schemes, index schemes, sectoral and thematic schemes among others under the equity umbrella.

A diversified large-cap scheme is also recommended. One should also avoid thematic schemes that may not last longer as we are talking about 15-20 years here.

🙂

Other experts too advocate index schemes as an option for novices in the stock market.

Since many of these young parents don’t have the experience of investing in stocks, they can go for index schemes with low tracking error (the difference between the index and scheme’s performance) and lower cost.

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Index schemes invest in stocks that form a particular index, that too in the exact weightage each stock has on the index. It is a passive form of investing and considered a cost effective option.

🙂

There are a few things experts want you to remember while investing for children.

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One, always pick up a scheme that has been around for at least five years and been a consistent performer during bull and bear phases.

Also take the money out of equity investments and park it in a safer avenue at least three years before the actual event.

Once you have accumulated the corpus, you should focus on preserving it till the actual event.

You can use the entire corpus if you have to make lump sum payment or use the proceeds from it to fund regular fees.

🙂

Child’s higher education is top priority for urban parents.

Many parents rely on wrong products to achieve the goal.

Equity route is considered best if you have at least 10 years.
You can consider investing in diversified equity scheme or index scheme

Make sure you are picking up a consistently performing scheme.
Transfer money to safer avenues three years before the actual event.

🙂

Retirement and children’s education are the biggest worry of young parents in metros these days. Financial advisors say most queries they receive are related to these two crucial issues. It is rare to find a parent who hasn’t thought of or bought a children’s insurance plan. “Children’s education is one of the top priorities of urban couples these days. They rightly believe education will be a costly affair, especially if the kid wants to study abroad,’’ says a wealth manager, who doesn’t want to be named. “However, when it comes to planning for the event, only some get it right. Most people buy the wrong products without realising that they won’t be able to achieve their goals,’’ he adds. Wrong products may range from fixed deposits and public provident fund to insurance plans. Interestingly, these experts are unanimous that the equity route, especially via mutual funds (MFs), is preferable to fund the child’s long-term needs.

“We get long queries from parents who want to plan for their children’s future. Though many people opt for insurance products, there are several others who go for mutual funds,’’ says Hemant Rustagi, CEO, Wiseinvest Advisors, a wealth management firm. “We ask them to take the equity route generally if it is a newborn baby or a very small child. This is because they can benefit from the possibility of higher returns and power of compounding during the accumulation phase,’’ he adds.

There is a plethora of schemes in the equity universe. How does one go about it? For example, you have the option of large-cap funds, mid-cap funds, diversified schemes, index schemes, sectoral and thematic schemes among others under the equity umbrella. “I would recommend a diversified large-cap scheme. One should also avoid thematic schemes that may not last longer as we are talking about 15-20 years here,’’ says Rustagi. Other experts too advocate index schemes as an option for novices in the stock market. “Since many of these young parents don’t have the experience of investing in stocks, they can go for index schemes with low tracking error (the difference between the index and scheme’s performance) and lower cost,’’ says the wealth manager. Index schemes invest in stocks that form a particular index, that too in the exact weightage each stock has on the index. It is a passive form of investing and considered a cost effective option.

There are a few things experts want you to remember while investing for children. One, always pick up a scheme that has been around for at least five years and been a consistent performer during bull and bear phases. “Never go for ‘flash in the pan’ kind of performance. You should make sure the scheme is actually looking to generate long-term returns rather than taking unnecessary risks to post huge returns during a particular phase,’’ says the wealth manager. Hemant Rustagi also wants you to take the money out of equity investments and park it in a safer avenue at least three years before the actual event. “Once you have accumulated the corpus, you should focus on preserving it till the actual event. You can use the entire corpus if you have to make lump sum payment or use the proceeds from it to fund regular fees,’’ he says.

NO KIDDING WITH JUNIOR’S EDU

Child’s higher education is top priority for urban parents

Many parents rely on wrong products to achieve the goal

Equity route is considered best if you have at least 10 years

You can consider investing in diversified equity scheme or index scheme

Make sure you are picking up a consistently performing scheme

Transfer money to safer avenues three years before the actual event