Four Keys to Retire Rich From Mr. Karpe
Most of us work all life in hope of a comfortable retirement. However, unless planned carefully, retirement can be all your nightmares coming true-your salary, the regular stream of income would dried up while expenses, such as health care and living, would have only shot up says Sachin Karpe
Have a look at four simple keys to ensure that your retirement is spent comfortably-
Know how much to save: More than 24% of the 2,578 respondents to an online survey conducted by economictimes.com last year said they were saving less than 5% of their income for retirement. Another 25% are putting away 5-10% of their income for their sunset years. It is unlikely this will be enough to sustain their current lifestyles when they stop working. A 2012 study by the US-based Putnam Research Institute says you should ideally be saving to cover 80-90% of your current expenses if you want a comfortable life after retirement. Anything less than that will require lifestyle compromises. Don't include EMIs, education and other children-related expenses in this calculation. This should just be the amount you and your spouse will need to sustain your desired lifestyle after you stop working. As mentioned earlier, the pattern of expenses will change-health care, insurance and transportation costs are likely to go up, but entertainment and clothing may come down. We assume that education and loans will no longer be a worry says Sachin Karpe
Start early: Most of us do not think about retirement till our late thirties. The actually planning begins when we are nearing 50 and have just ten odd years to save. This delay takes away a vital ingredient out of any retirement plan-the magic of compounding. What one saves in the first few years of starting a career burgeons into a massive amount over the next 25-30 years even though the individual saves more in the later years as his income grows. Even if he enhances his savings by 10% every year, what he puts away in the first 10 years will account for almost 24% of the total retirement corpus. If you don't start at the age of 25-30, you lose out on the wonder years of growth. Don't save for the first five years and your corpus will be 18% slimmer. Even a 3-year delay can make the corpus 7% smaller says Sachin Karpe. Committing yourself to a long-term insurance plan can automatically instill such discipline.
Have a look at four simple keys to ensure that your retirement is spent comfortably-
Know how much to save: More than 24% of the 2,578 respondents to an online survey conducted by economictimes.com last year said they were saving less than 5% of their income for retirement. Another 25% are putting away 5-10% of their income for their sunset years. It is unlikely this will be enough to sustain their current lifestyles when they stop working. A 2012 study by the US-based Putnam Research Institute says you should ideally be saving to cover 80-90% of your current expenses if you want a comfortable life after retirement. Anything less than that will require lifestyle compromises. Don't include EMIs, education and other children-related expenses in this calculation. This should just be the amount you and your spouse will need to sustain your desired lifestyle after you stop working. As mentioned earlier, the pattern of expenses will change-health care, insurance and transportation costs are likely to go up, but entertainment and clothing may come down. We assume that education and loans will no longer be a worry says Sachin Karpe
Start early: Most of us do not think about retirement till our late thirties. The actually planning begins when we are nearing 50 and have just ten odd years to save. This delay takes away a vital ingredient out of any retirement plan-the magic of compounding. What one saves in the first few years of starting a career burgeons into a massive amount over the next 25-30 years even though the individual saves more in the later years as his income grows. Even if he enhances his savings by 10% every year, what he puts away in the first 10 years will account for almost 24% of the total retirement corpus. If you don't start at the age of 25-30, you lose out on the wonder years of growth. Don't save for the first five years and your corpus will be 18% slimmer. Even a 3-year delay can make the corpus 7% smaller says Sachin Karpe. Committing yourself to a long-term insurance plan can automatically instill such discipline.