Retirement is an inevitable goal for all investors. However, often retirement planning takes a back seat as an investor other goals such as child’s education, marriage, buying a house take precedence over retirement. So, it is important for advisors to nudge their clients to plan for their retirement.
Asoke Roy, Kolkata
In 1998, a client of advisor Asoke Roy was in the habit of withdrawing his investments immediately after making some profits. Seeing the client’s flighty behaviour, Asoke explained to him the risks involved in timing the market. He urged the client to stay invested longer if he wanted to be financially independent during retirement. So far, the client had never considered retirement planning and the impact of inflation on his expenses. He was shocked to know that if he wished to sustain his current lifestyle post retirement, he would need a corpus of Rs. 2.5 crore. This turned to be a wake-up call for him and he immediately agreed to start investing towards retirement.
To help the client achieve the target corpus in 20 years (by 2018), Asoke recommend SIP in a mix of multicap and balanced funds. He also advised the client to invest any surplus amount received such as bonus or incentives into his retirement kitty. He also regularly topped up the client’s SIP instalments in line with the increase in his salary.
Over the years, as the client neared his target retirement amount, Asoke shifted his investments gradually into debt.
In 2016, despite having two more years for official retirement, due to some unfortunate circumstances the client had to quit office. He was pleasantly surprised when Asoke assured him that his retirement kitty was Rs. 2.6 crore!
During the last two years, the client has been withdrawing Rs. 60,000 per month through SWP to take care of his monthly expenses. He recently increased the withdrawal amount to Rs. 66,000 in line with inflation. Asoke plans to review the withdrawal amount regularly and increase it if client requires. He also advises the client on budgeting to make the kitty last longer.
Praveen Chhajed, Chhajed Investments, Pune
An investor approached Praveen for investment advice. He was retiring in seven years and wanted Praveen’s opinion on whether his savings would be able to sustain him post retirement. The investor’s children were married and he had no financial obligations. So far, the investor had been investing his money exclusively in bank FDs. While the investor had accumulated a substantial corpus, Praveen realised that it would not be enough. So, despite the client’s advanced age, he decided to advise his client to take some equity exposure. Knowing that the client would receive a pension of about Rs. 3-4 lakh post retirement, Praveen calculated that he would need to create additional cash flow of around Rs. 4 lakh (per year) for the client. Overall, the client invested around Rs. 1.1 crore in equity funds through a mix of lumpsum investments and STP. Majority of his investments were in large cap funds while Praveen recommend a small allocation to mid and small caps to boost returns. The client retired last year and was happy to know that he had achieved his investment target of Rs. 2.24 crore. Currently, he receives about Rs. 4-5 lakh per year in dividend option.
