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Do you really need Rs 8 crore for your retirement?

July 29, 2014 12:21 IST

Do you really need Rs 8 crore for your retirement?

P V Subramanyam

Don't take those who throw such magnificent numbers at you seriously! Even if you reach Rs 4 crore it won't be the end of your world.

Financial planners, mutual fund sellers, bank relationship managers, all of them have a knack of racking up a large number when it comes to your retirement corpus!

Normally they do this so that they can galvanise the client to act.

However, from what I have seen, it normally has a negative effect! When people look at a huge number -- say Rs 5 crore -- the immediate thought is "Oh, my God!" I cannot do anything about this!

However this is not true, nor desirable.

You as a customer (client) should understand that this is a nice round figure, but if you do reach Rs 4 crore, it is not the end of the world.

Also you need to understand that if you start to save, say 30 years in advance, you may need to invest only Rs 80 a day to reach there. However if you start 5 years before retirement, you may need much, much, much more -- say Rs 6 lakh a month (or Rs 20,000 a day!).

So instead of killing your adviser, start, albeit with a small amount. Starting is more important than the amount with which you start. It is like getting a root canal treatment done -- do not try doing 12 teeth at a time!

Far more importantly, the inflation figure today is about 10-15 per cent per annum for many of our expenses. From where financial planners take this figure of 8 per cent is not easy to understand.

However if you do take a figure of 15 per cent inflation for 20 years it will scare the hell out of you. And in an internationally competitive economy, salaries may not go up at that rate. So what are your options?

I am here just to ask questions -- all of us need to find out your own answers for these complicated questions.

A simple lifestyle, low level of expenses, better understanding of health, wealth, and basic finances are a nice step in that direction. One illness (say blood pressure or diabetes) detected at age 42 years can cost you about Rs 55 lakh over your remaining lifetime.

So not understanding exactly how much you need for retirement is fine, but, however, taking steps to improve health, reduce weight and blood pressure, sugar, stress, improve flexibility of mind and body, and investing for retirement is something that you have to do.

The money will take care of itself. Honestly.

Photographs: Dominic Xavier/
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