wealth management retirement planning. meaning of retirement. misconception regarding retirement...
TRANSCRIPT
Wealth Management
Retirement Planning
Meaning of Retirement.
Misconception regarding Retirement Planning
The Hard Nuts
What is Retirement Planning?
Need for Retirement Planning.
Estimating Retirement Living Expenses
Impact of Inflation
Living on Retirement Income
Avenues of Retirement Planning
Advantage of Mutual Fund
Advantage Pension Plans
Retirement Blues and its planning Consist of the following
‘Retirement’ in perspective
Different in perspectives.
If properly planned – can be ‘fun & frolic’- otherwise it could be a “curse”
No longer means stop work at the age of 58 or 60 (Slowing down the pace, doing
what one wants to do rather than money earning being the goal.)
Professionals now have multiple option after they reach 60.( not just employees)
Advanced medical facilities have increased average life of a person to 75 years.
Misconceptions Regarding Planning for Retirement
My retirement expense will reduce once I retire.
My retirement will only last 10 years. ( retirement
age coming down and life is increasing– could be
30 years now)
My pension amount will keep pace with inflation.
There’s plenty of time (?) for me to start saving
for retirement.
Saving just a little bit won’t help. (Savings is the
basis for PASSIVE income)
Eight aspects of retirement you need to plan for:
Timing of retirement
Finding out how much money would be needed
How to create a regular income
Understanding impact of inflation
Rising healthcare costs (Health insurance must- either from spouse/son/daughter/ now bought )
Adequacy of accumulated retirement funds
Retirement housing - may have special characters ( Stay with Sons/daughters becoming difficult – up country /baby sitting/their problems sharing / their feeling of suffocation)
Like Farm house, cattle, more people to live,
Among friends and relatives,
Village atmosphere,
Medical facilities Present one may not be suitable)
What is Retirement Planning?
Saving sufficient fund to live comfortably in retirement years
Need to estimate amount required after retirement
Involves calculating monthly earning
Involves taking into account rate of inflation
to keep aside sufficient fund for contingencies
Further commitments
Gifts and Travel ( pilgrimage / pleasure trips/ visiting Son/daughter in other countries )
Food, Medical, housing, transport etc
Need for Retirement Planning
Increased longevity of Indians
Declining Government support
Breakdown of traditional family structure ( JHF was the best Insurance Plan– now does not work)
Increased work life span
More expenses, less income
Protection of spouse/ dependent
Compounding effect of money– not return but expenses galloping)
Estimating After-retirement Living Expenses
Spending patterns and where and how you live will probably change
Some expenses may go down or stop. Work expenses - gas, lunches out. Clothing expenses - fewer and more casual. Housing expenses - house may be paid off, but
taxes and insurance may go up. Federal income taxes will probably be lower. Special slab for senior citizens, Discount in
Travel rates for senior citizens.
Estimating Retirement Living Expenses
Other expenses may go up.
Life and health insurance unless your employer continues to pay them. Medical expenses increase with age. Expenses for leisure activities. Gifts and contributions.
Inflation will raise the amount you need to cover your expenses over your probable 16-20 years in retirement
Impact of Inflation Inflation – a silent killer
Slowly erodes purchasing power of retirement income
Inflation at 7% reduce purchasing power of money to 50% in 10 years
Inflation in education sector – 26%
Inflation in medical sector – 15%
India does not have long term care insurance to take care of old age health expense
No plan covering health, accidental, term and funeral expenses.
Food
Medical
Housing
TransportationClothing
Contributions
Insurance and other
Entertainment
32.5%
11.3%
16.3%16.3%
15.4%15.4%
4.9%
5.7%
7.7%
6.2%
How an “Average” Older (60+) Household Spends its Money
In case Own accommodation, Taxes, repairs, un realizable rent to be considered
Living on Retirement Income
Retirees get a variety of tax savings, use them. Expect fewer senior discounts as boomers retire. Consider working during “retirement.” (Part time
light)Invest some of your retirement income for
*growth to allow for inflation andincreased health care costs.
Consider 60% stocks and 40% bonds. Dip into savings with caution, since you do not
know how long you will live
Products customized for retirement planning
1. Retirement Plans from mutual funds
2. Pension Plans
3. Post Office Schemes
4. Term Plans (Life Insurance and Annuity)
General category
1. Financial Assets (Not Hedge Funds or Exotic Products (Nifty index based etc)
a. Equity
i. Stocks
ii. Equity Mutual Funds
b. Debt
i. Fixed Deposits
ii. Post-Office Savings Products
iii. Govt. Securities
iv. Bonds and Debentures
General category continues
2. Real Assets
a. Real Estates
i. Real Estate Mutual Funds
ii. Land, Apartments, Houses
b. Gold
i. Coins
ii. Biscuits
iii. Jewellery ( Can enjoy wearing of the same- apart from capital appreciation.
Mutual Fund AdvantageInvesting in mutual funds gives investors eight advantage :
Diversification
Professional management of Investments
Convenient Administration
Lower cost
Flexibility
Liquidity
Transparency
Affordability (Un like Hedge Funds)
Advantage Pension Plans
Good channel for retirement investment since withdrawal not encouraged
Annuity for life option ensures that there would be income despite exhausting money in other options
The eligibility of Sec. 80C is extended for annuity investment of up to Rs. 1 lakh per individual
Pension Plans are a safety net for individual’s retirement since the govt. does not offer an old age financial security net. ( PSUs coming-up with Pension plans for already retired people under PF basis by returning back PF drawn)
Products for Retirement Planning
1. Retirement Plans from Mutual Funds
Templeton India Pension Plan
UTI Retirement Plan
2. Pension Plans
Reliance Life - Golden Years Plan
Bajaj Allianz – Swarna Vishrani
Birla Sun Life – Flexi SecureLife 2
HDFC Standard Life – Personal Pension Plan
Products for Retirement Planning (contd.)
2. Pension Plans (contd.)
ICICI Prudential Life
ForeverLife
LifeLink Super Plan
LifeTime Super Pension
ING Vysya – Best Years Retirement Plan
Kotak Life Insurance – Kotak Retirement Income Plan
Products for Retirement Planning (contd.)
2. Pension Plans (contd.)
LIC
New Jeevan Suraksha -1
New Jeevan Dhara -1
Jeevan Nidhi
Max New York Life – Easy Life Retirement
Tata-AIG Life - Nirvana
Products for Retirement Planning (contd.)
3. Post Office Schemes
National Savings Certificate
Public Provident Fund
Kisan Vikas Patra
Monthly Income Scheme
Time Deposits
Recurring Deposits
Senior Citizens Savings Scheme
Products for Retirement Planning (contd.)
4. Term Plans
Bajaj Allianz Life – Risk Care Economy Plan
Birla Sun Life – BSLI’s Term Plan
HDFC Standard Life – HDFC Term Assurance Plan
ICICI Prudential Life – Life Guard
Kotak Mahindra – Kotak Preferred Term Plan
LIC – Anmol Jeevan
Max New York Life – Level Term Plan
Products for Retirement Planning (contd.)
Met Life
Met Suraksha TA
Met Suraksha TROP
SBI Life Insurance – Shield Option 1,2&3
Tata AIG – Assured Lifeline Plan
CHALLENGE
Design your own RETIREMENT PLAN That hedges against inflation. Liquidity ensured. Loan not a burden for repayment or penal
interest
If you r suggestion meets my expectations / solution Rs 100/- as PRESENT Time till next week class.– come out with clear cut plan and explain in the class.
Estate Planning
Prasad PVLN
Objectives
Segregating Assets from beneficiaries' Control Trust property is not subject to personal debts of beneficiaries. Beneficiaries cannot deal either with property or its income. Better management by DEPENDABLE persons Objective of Pooling wealth is achieved.
To determine heirs/beneficiaries of estate Provide financial support to dependents Planning the way beneficiaries will receive assets Distribution of estate property Executor/co executor who will setele the estate
Methods of disposing property
Transfer during life time Gifts Power of attorney Selling
Transfer at death Will Nominee in specific cases
Management of Estate
Trusts and Associations Irrevocable conveyance / trusts Beneficiaries Management Distribution of income to the beneficiaries Details of how to MANAGE and conduct
“Activity” of Trust
Will Intestacy Will preparation Information requirement Attorney Features of will
Introductory clause Direction of payments Disposition Appointment clause Tax clause Simultaneous death clause Execution and attestation Witness clause
Changing or revoking the will
Requirements of valid will
Sound mind Freedom of choice Proper execution