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Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement...

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Wealth Management Retirement Planning
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Page 1: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Wealth Management

Retirement Planning

Page 2: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Meaning of Retirement.

Misconception regarding Retirement Planning

The Hard Nuts

What is Retirement Planning?

Need for Retirement Planning.

Estimating Retirement Living Expenses

Impact of Inflation

Living on Retirement Income

Avenues of Retirement Planning

Advantage of Mutual Fund

Advantage Pension Plans

Retirement Blues and its planning Consist of the following

Page 3: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

‘Retirement’ in perspective

Different in perspectives.

If properly planned – can be ‘fun & frolic’- otherwise it could be a “curse”

No longer means stop work at the age of 58 or 60 (Slowing down the pace, doing

what one wants to do rather than money earning being the goal.)

Professionals now have multiple option after they reach 60.( not just employees)

Advanced medical facilities have increased average life of a person to 75 years.

Page 4: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Misconceptions Regarding Planning for Retirement

My retirement expense will reduce once I retire.

My retirement will only last 10 years. ( retirement

age coming down and life is increasing– could be

30 years now)

My pension amount will keep pace with inflation.

There’s plenty of time (?) for me to start saving

for retirement.

Saving just a little bit won’t help. (Savings is the

basis for PASSIVE income)

Page 5: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Eight aspects of retirement you need to plan for:

Timing of retirement

Finding out how much money would be needed

How to create a regular income

Understanding impact of inflation

Rising healthcare costs (Health insurance must- either from spouse/son/daughter/ now bought )

Adequacy of accumulated retirement funds

Retirement housing - may have special characters ( Stay with Sons/daughters becoming difficult – up country /baby sitting/their problems sharing / their feeling of suffocation)

Like Farm house, cattle, more people to live,

Among friends and relatives,

Village atmosphere,

Medical facilities Present one may not be suitable)

Page 6: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

What is Retirement Planning?

Saving sufficient fund to live comfortably in retirement years

Need to estimate amount required after retirement

Involves calculating monthly earning

Involves taking into account rate of inflation

to keep aside sufficient fund for contingencies

Further commitments

Gifts and Travel ( pilgrimage / pleasure trips/ visiting Son/daughter in other countries )

Food, Medical, housing, transport etc

Page 7: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Need for Retirement Planning

Increased longevity of Indians

Declining Government support

Breakdown of traditional family structure ( JHF was the best Insurance Plan– now does not work)

Increased work life span

More expenses, less income

Protection of spouse/ dependent

Compounding effect of money– not return but expenses galloping)

Page 8: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Estimating After-retirement Living Expenses

Spending patterns and where and how you live will probably change

Some expenses may go down or stop. Work expenses - gas, lunches out. Clothing expenses - fewer and more casual. Housing expenses - house may be paid off, but

taxes and insurance may go up. Federal income taxes will probably be lower. Special slab for senior citizens, Discount in

Travel rates for senior citizens.

Page 9: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Estimating Retirement Living Expenses

Other expenses may go up.

Life and health insurance unless your employer continues to pay them. Medical expenses increase with age. Expenses for leisure activities. Gifts and contributions.

Inflation will raise the amount you need to cover your expenses over your probable 16-20 years in retirement

Page 10: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Impact of Inflation Inflation – a silent killer

Slowly erodes purchasing power of retirement income

Inflation at 7% reduce purchasing power of money to 50% in 10 years

Inflation in education sector – 26%

Inflation in medical sector – 15%

India does not have long term care insurance to take care of old age health expense

No plan covering health, accidental, term and funeral expenses.

Page 11: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Food

Medical

Housing

TransportationClothing

Contributions

Insurance and other

Entertainment

32.5%

11.3%

16.3%16.3%

15.4%15.4%

4.9%

5.7%

7.7%

6.2%

How an “Average” Older (60+) Household Spends its Money

In case Own accommodation, Taxes, repairs, un realizable rent to be considered

Page 12: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Living on Retirement Income

Retirees get a variety of tax savings, use them. Expect fewer senior discounts as boomers retire. Consider working during “retirement.” (Part time

light)Invest some of your retirement income for

*growth to allow for inflation andincreased health care costs.

Consider 60% stocks and 40% bonds. Dip into savings with caution, since you do not

know how long you will live

Page 13: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Products customized for retirement planning

1. Retirement Plans from mutual funds

2. Pension Plans

3. Post Office Schemes

4. Term Plans (Life Insurance and Annuity)

Page 14: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

General category

1. Financial Assets (Not Hedge Funds or Exotic Products (Nifty index based etc)

a. Equity

i. Stocks

ii. Equity Mutual Funds

b. Debt

i. Fixed Deposits

ii. Post-Office Savings Products

iii. Govt. Securities

iv. Bonds and Debentures

Page 15: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

General category continues

2. Real Assets

a. Real Estates

i. Real Estate Mutual Funds

ii. Land, Apartments, Houses

b. Gold

i. Coins

ii. Biscuits

iii. Jewellery ( Can enjoy wearing of the same- apart from capital appreciation.

Page 16: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Mutual Fund AdvantageInvesting in mutual funds gives investors eight advantage :

Diversification

Professional management of Investments

Convenient Administration

Lower cost

Flexibility

Liquidity

Transparency

Affordability (Un like Hedge Funds)

Page 17: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Advantage Pension Plans

Good channel for retirement investment since withdrawal not encouraged

Annuity for life option ensures that there would be income despite exhausting money in other options

The eligibility of Sec. 80C is extended for annuity investment of up to Rs. 1 lakh per individual

Pension Plans are a safety net for individual’s retirement since the govt. does not offer an old age financial security net. ( PSUs coming-up with Pension plans for already retired people under PF basis by returning back PF drawn)

Page 18: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Products for Retirement Planning

1. Retirement Plans from Mutual Funds

Templeton India Pension Plan

UTI Retirement Plan

2. Pension Plans

Reliance Life - Golden Years Plan

Bajaj Allianz – Swarna Vishrani

Birla Sun Life – Flexi SecureLife 2

HDFC Standard Life – Personal Pension Plan

Page 19: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Products for Retirement Planning (contd.)

2. Pension Plans (contd.)

ICICI Prudential Life

ForeverLife

LifeLink Super Plan

LifeTime Super Pension

ING Vysya – Best Years Retirement Plan

Kotak Life Insurance – Kotak Retirement Income Plan

Page 20: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Products for Retirement Planning (contd.)

2. Pension Plans (contd.)

LIC

New Jeevan Suraksha -1

New Jeevan Dhara -1

Jeevan Nidhi

Max New York Life – Easy Life Retirement

Tata-AIG Life - Nirvana

Page 21: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Products for Retirement Planning (contd.)

3. Post Office Schemes

National Savings Certificate

Public Provident Fund

Kisan Vikas Patra

Monthly Income Scheme

Time Deposits

Recurring Deposits

Senior Citizens Savings Scheme

Page 22: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Products for Retirement Planning (contd.)

4. Term Plans

Bajaj Allianz Life – Risk Care Economy Plan

Birla Sun Life – BSLI’s Term Plan

HDFC Standard Life – HDFC Term Assurance Plan

ICICI Prudential Life – Life Guard

Kotak Mahindra – Kotak Preferred Term Plan

LIC – Anmol Jeevan

Max New York Life – Level Term Plan

Page 23: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Products for Retirement Planning (contd.)

Met Life

Met Suraksha TA

Met Suraksha TROP

SBI Life Insurance – Shield Option 1,2&3

Tata AIG – Assured Lifeline Plan

Page 24: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

CHALLENGE

Design your own RETIREMENT PLAN That hedges against inflation. Liquidity ensured. Loan not a burden for repayment or penal

interest

If you r suggestion meets my expectations / solution Rs 100/- as PRESENT Time till next week class.– come out with clear cut plan and explain in the class.

Page 25: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Estate Planning

Prasad PVLN

Page 26: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Objectives

Segregating Assets from beneficiaries' Control Trust property is not subject to personal debts of beneficiaries. Beneficiaries cannot deal either with property or its income. Better management by DEPENDABLE persons Objective of Pooling wealth is achieved.

To determine heirs/beneficiaries of estate Provide financial support to dependents Planning the way beneficiaries will receive assets Distribution of estate property Executor/co executor who will setele the estate

Page 27: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Methods of disposing property

Transfer during life time Gifts Power of attorney Selling

Transfer at death Will Nominee in specific cases

Page 28: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Management of Estate

Trusts and Associations Irrevocable conveyance / trusts Beneficiaries Management Distribution of income to the beneficiaries Details of how to MANAGE and conduct

“Activity” of Trust

Page 29: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Will Intestacy Will preparation Information requirement Attorney Features of will

Introductory clause Direction of payments Disposition Appointment clause Tax clause Simultaneous death clause Execution and attestation Witness clause

Changing or revoking the will

Page 30: Wealth Management Retirement Planning. Meaning of Retirement. Misconception regarding Retirement Planning The Hard Nuts What is Retirement Planning? Need.

Requirements of valid will

Sound mind Freedom of choice Proper execution


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