Billionaire

Ram Retirement Planning 2008
 

K. V. Ramaswamy and Vijay S. Choksi
Quadratic Financial Services Pvt. Ltd.

Retirement planning is going to be a very big problem in the days to come.

Looking at the factors like:

  1. Consumption going up

  2. Expenses going up

  3. Inflation going up

  4. Income coming down in relative terms

  5. Lifestyles changing in favour of consumerism

  6. Luxuries requirements increasing

  7. Competition very furious in all segments of the economy

  8. World wide focus on India and its huge middle class

  9. No Safety net from the Govt. as in other countries

  10. No planning of long term objectives being done in a systematic manner

Simplified Saving and Compounding Impact Model for Mr. Ram
Basic Details – Assumptions — A very Conservative approach

Present Age — Years

40

Expect to retire after — Years

15

Amount Required per Month 

 

 

 

after Retirement- Rs.

1,00,000 

Amount Required per Year — Rs.

 12,00,000

Annual Compounding Rate —
p. a.

8.00%

Annual Saving for this Investment –
 - Rs. Lakh

2

Present Saving Balance Rs. Lakh

10

Annual Incremental Saving - %

10%

Asset Allocation

Not considered in detail, as fixed income investments at present and in future expected to cover for the same

Tax Impact

Nil at present - Long Term Cap Gain/Dividend

Inflation etc.

Ignored for simplicity of working

 

Retirement Working Model

Rs. in lakhs

Year

Assumed 
Dates

Starting 
Amt./Annual 
Addition

Expected Yield
p. a. @

 

 

8.00%

9.00%

10.00%

Annual 
Total

Yield

Annual 
Closing 
Balance

Annual 
Closing
Balance

Annual 
Closing
Balance

1

4/1/2008

10

10

0.8

10.8

10.9

11

2

4/1/2009

2

12.8

1.02

13.82

14.06

14.3

3

4/1/2010

2.2

16.02

1.28

17.31

17.72

18.15

4

4/1/2011

2.42

19.73

1.58

21.3

21.96

22.63

5

4/1/2012

2.66

23.97

1.92

25.88

26.84

27.82

6

4/1/2013

2.93

28.81

2.3

31.12

32.44

33.82

7

4/1/2014

3.22

34.34

2.75

37.08

38.87

40.75

8

4/1/2015

3.54

40.63

3.25

43.88

46.23

48.72

9

4/1/2016

3.9

47.78

3.82

51.6

54.64

57.88

10

4/1/2017

4.29

55.88

4.47

60.36

64.23

68.38

11

4/1/2018

4.72

65.07

5.21

70.28

75.15

80.41

12

4/1/2019

5.19

75.46

6.04

81.5

87.57

94.15

13

4/1/2020

5.71

87.21

6.98

94.18

101.67

109.84

14

4/1/2021

6.28

100.46

8.04

108.5

117.67

127.73

15

4/1/2022

6.9

115.4

9.23

124.63

135.78

148.1

Total Saving

 65.95

This model ensures that the investment grows consistently. Systematic Investment Plans ensures outperformance on the market over a time horizon of over 3-5 years.

Pls note this is not a short term strategy and must only be applied for long term investment.