Here – a reader who bought and read “Retire Rich: Invest Rs. 40 a day” in ONE SITTING…had the following things to say..I am not commenting on this because it is already 1300 words! Thank you Balaji…I have not edited it…his views, his words…

• Medical Insurance: Most working professionals just rely on the insurance coverage provided by their organizations and don’t take a personal medical cover in parallel. I for one was forced to take one when I joined a start up .. and it worked well for me – not by design though. The earlier one starts a medical coverage for family – the cheaper it is, of course premiums go up with inflation and increases on account of age.
• Another important variant of a medical policy which is available know is a Top up Medical Policy which comes at a pittance of a cost for 2 to 3 times the existing coverage. – This should be a mandatory must with all medical policies. I guess a good enough medical policy coverage with regular top up’s once in 5 years could take care of inflationary medical costs. This could be one cost item which can never be adequately forecast and can actually wipe out the retirement savings. Most of the people I talk to are not even aware of this top up feature as a product at all, as the premiums are so low – hardly any advisers sell it. Would be great if this is brought to the attention of your larger audience.
• Estimating the cost of living – current expenses. I feel we place far too much relevance on inflation to factor future expenses. Case in point being a bigger ding on the expenses increasing YOY in every stage of life is especially in your 30’s and early 40’s is on account of expenses which are attributable to an increased standard of living. This increased expenses on account of standard of living is often mistaken as inflation by the layman. We usually reach out peak in terms of standard of living in say our 40’s. I for one have tracked my expenses to a T in the past 8 years and realized that my expenses including regular opex and one-time costs like Vacations, insurance premiums etc has grown @ a CAGR of around 2% which beats inflation over 8 years. So my expenses have actually peaked out. This after considering I have a 6-year-old growing kid whose expenses have been factored in the past 8 years, and have a fairly decent lifestyle which I support.
• Another thing that one needs to factor from a retirement perspective is that most of this peak annual opex expenses which we incur at this stage in life would not be incurred during our retirement stage – not from an affordability perspective but mostly from the fact that you would outgrow expending a lot on clothes – restaurant meals 10 times a month etc, by that stage. Hence my belief is that a decent part of the peak monthly expenses – would take care of inflation actually at the time of retirement. Not sure if I am getting my thought thru accurately enough here.
• Another thing which cannot be stressed enough is tracking of expenses to the T. I manage to do it by incurring less than 10% of my annual opex in cash – Every possible expense is thru Cr Card – hence tracked regularly. For any person who starts tracking expense for the first time for one annual cycle – my experience is that he can save a minimum of 10% on the baseline just by monitoring – discipline falls into place. Thus the importance of going digital for all spends cannot be stressed enough as one can leave a trail for all expenses – easily trackable unlike cash expenses. Demonetization worked wonders to this model of mine – got my cash expenses down from 20% to 10% during this stage.
• Another thing that helps me in a big way with credit cards spends ( obviously with the Caveat that one has the discipline to pay in time and not fall in a debt trap) is the points. Cash value of points earned over past 4 years would be upwards of 5 lakhs – Tax free – Grossed up for tax at least 30% more. Loved the example in Chapter 19 on the credit Card debt.
• Clause 6 on Page 190 refers to LTCG on shares and Mutual Funds as tax free – Last year’s budget made this taxable. Just wanted to call this out.
• Loved the example on Page 208 on the 5 year challenge to not change the Phone – Gonna take this up on myself for both my Phone and my car.
• NPS – Page 273 – Tax deferral – Completely agree with you, while the focus is only on the 50K, Employer’s contribution to NPS – Section 80CCD (2) Additional deduction is allowed for employer’s contribution to employee’s pension account of up to 10% of the Basic salary of the employee. There is no monetary ceiling on this deduction. This is a deduction from Gross total Income (GTI). So if one’s basic salary is 20L p.a. then additional 2Lakhs can be deducted from GTI over and above the 1.5L – 80C and 50K on NPS tier 1.
• This investment though towards retirals would form a small chunk of your monthly savings – and the limits have increased from 50% into equity to 75% in equity and 25% debt.
• While I do understand that this would fall under EET and would be taxable at the time of withdrawal – the latest amendment allows 60% to exempt from Tax and while the 40% invested in annuities would be taxable. – This @ the max Marginal Rate would translate to a 40% x 30% = 12% tax on the overall corpus. While I do understand that indexation is not available on the same, assuming post retirement with zero taxable income, can’t the withdrawals be timed efficiently to keep incomes under taxable slabs. This is assuming the withdrawals is taxable as income from other sources and not capital gains. Thus getting the effective tax rate to even lower – Do let me know if I am understanding this right or if my basic premise is incorrect. Basis the above I do believe that NPS is a good investment product.
• I have been investing in Tier 1 for the past 2.5 Years and its giving me a weighted average return of 12%+ with a 75%/ 25% split ( better part of 20 months was with a 50%/50% split between equity and debt). Not to mention the 30% tax rebates on the overall investment.
• Another glitch in the system I have figured is investment in Tier 2 – NPS products ( Which you can invest thru only if you have a Tier 1 Account), which is liquid and just like any other mutual fund (No lock in here). These funds have a very low management cost and have invested in no brainer Large caps. The glitch is that the NPS system allows you to invest in these thru Credit Cards. I had timed the investment as a monthly SIP on the date of my credit date bill generation and get an additional return of at least 100 basis points for the 50 Day credit period, and a 3.33% Cash Reward Points for the amounts invested. So totally a one-time bump of around 450 Basis points – which actually in real terms gets to be quite substantial. This investment of mine has been giving me a return of around 13% over the past two years ( excluding the one-time bump of 450 basis Points). Hence am quite a Fan of NPS as a product overall.
• One thing I am struggling with in terms of savings for my sons – undergrad and post grad education – in the US – is the forex piece. Would it make sense to invest in Dollar equities in the US like the Amazons and Apple’s of the world with a 12 Year vision as we would normally do in Indian equities. Would this act as a natural hedge against rupee depreciation and dollar savings can fund the US Education. Would love to hear your thoughts on the same.

Once again your book was a brilliant read and certainly tickled the better parts of my brains. Look forward to more from you. Hope some of the tidbits and my two bits make some sense to you. Great connecting – Cheers.

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