Reducing Retirement corpus anxieties

The PGIM India Retirement Readiness Survey 2023 revealed some interesting insights that I thought would be helpful for people to know who are considering building their retirement corpus.

- Ajit Menon, CEO, PGIM India AMC

The survey found that households have identified financial goals like children’s education, marriage, buying a house or car, starting a business, retirement, healthcare expense, etc.

However, most people do not save and allocate investments separately for each specific goal. At the time of conducting the survey, people had a number in mind which is roughly 10 to 12 times their annual income. Most tend to take the approach of building a corpus of 50 lakh or 1 crore or any such number which they intend to use as and when something becomes a priority. This usually tends to be financial needs for their children’s education and marriage. Retirement, though a big need, takes a backseat. Focus on goal-based investing. Separating investment accounts for each specific goal is important and allocating early and specifically for Retirement is even more important for one reason alone. That is “Retirement is the only financial goal of your life for which you do not get a conventional loan.” A gap in the requirement of any other goal can be fulfilled by an education loan, home loan, car loan, business loan etc. But not for retirement.

Retirement planning often focuses on a required number – it could be 50 lakh, 1 crore, 2crore or 5 crore or more depending on the outputs from Retirement calculators. In this post, I wish to draw your attention to a simple concept which can help you plan for this goal.

Replacing active income with passive

To start with, ascertain how long does it take to replace one year's income with your savings and returns on your investment. And how much faster it gets if you already have a starting pool of money. In this regard, starting early has a huge advantage.