Suppose you want to go from place A to place B. Let us assume that the total cost of travel is about Rs. 600. Will you set out of the house with exactly Rs. 600 in hand? No? how much are YOU comfortable with? Rs. 4000? Rs. 5000?

Will you step out with Rs. 5000, a debit card, a credit card…just in case…

right? well if I told you that you needed Rs. 20 crores for retirement…will you be happy with Rs. 20 crores? what if you live till 118 instead of 93?

THIS IS SO SCARY FOR MOST RETIREES that they do not spend their money – and this money is likely to be inherited by the children and grandchildren!!

Why does this happen? and what can we do about this?

The old and classic view of retirement is that in the early years people should save and invest (the accumulation phase) in order to retire and consume their assets (the withdrawal phase). You earned, enjoyed, invested and you should finish all your money by the time you go. Well it does not happen that way at all. People are a little reluctant to spend – sadly we do not have enough Indian data..so we have to go to the US data. Even in the US given the poor returns that equity and debt markets have given people have a huge gap in the withdrawals. What they can vs. what they did. They did not spend the ‘safe withdrawal rate’. Again meaning that people do not like to spend unless they have a very huge corpus.

So if I were to tell you that you need X so that you can retire, you need to decide about at what number YOU will be happy or contended and CONFIDENT to spend. THAT IS YOUR RETIREMENT number not what our calculators tell you. www.franklintempletonindia.com has a good retirement calculator and allows you to decide on inflation rate, expected return rate, etc. – go there and find out how much of a retirement corpus do you need…

Though it may sound very prudent to start spending your retirement corpus the day you retire..I am happy to part consume and part grow the retirement corpus from age 60 to 72. At your age of 72 it might be all right for you to draw down your corpus..and hope to kick the bucket at say 85. However what happens if you live till 92? or 113? Such worries plague the retiree and hence he/she is not too keen to finish the corpus. Sure if you leave all your corpus to your children I would call you ‘under utilised’ for your portfolio, but given the financial insecurities, it makes sense. My father for example continues to live on his income and will not touch his assets at all for his expenses. That is thanks to the nice portfolio appreciation and the big dividends that the companies paid / are paying.

Will we be that lucky? What about those childless couples – they are paranoid about finishing their money – remember they may not have anybody to turn to if they do finish their corpus.

How about you? how well are you prepared?

1. With the corpus
2. ability to simplify the portfolio by the time you are 74
3. living off the corpus..till you are confident that your capital withdrawal will not hurt you..
4. managing your day to day operations..and having a dependable and trustworthy person to look after your finances
5. moving into a geriatric care center by the time you are not capable of taking care of yourself and your finances?

…time to ponder..