The Savings Series: Planning for retirement

A backyard with a view of the beach, dog fur on block-printed bed linen and succulents named after the characters of the Marvel Comic Universe – these were the things on my wish list titled “Retirement Must-haves.” The list grew one Pinterest scroll at a time, but with the onset of adulthood and the harsh reality check that followed, my planning for retirement list was eventually redubbed “LOL”.

Retiring in the cashmere lined lap of luxury is a dream that few manage to achieve. According to a survey published in the Economic Times, 76% of “working age people” in India expect a comfortable retirement while only 33% put money aside to fund it.

We asked Anil Sharma, retired executive vice president at ITC, to chalk out a foolproof plan on planning for retirement, regardless of when you start.

How to start planning for retirement

20s: Baby steps

Just like 20-somethings take their lightening-fast metabolism for granted, they ignore taking charge of their finances. According to Sharma, starting early is non-negotiable. “Both my wife and I were working, so we decided to put aside one of our salaries towards investments and manage our expenses with the other.”

You can start saving with as little as Rs 500. Sharma also recommends that you save some before you spend all – “All the books I’ve read say that it is human nature to spend and then save, however, to achieve a perfect retirement plan, you must reverse this process.” So, the next time you get your salary, putting aside a portion for your retirement wish list might be a better idea than another pair of Zara heels.

Hire a financial advisor or wealth planner to help organise your finances. From how to save and where to invest to helping you make any important decision regarding your finances –– a financial advisor is the fairy godmother to your (financially incompetent) Cinderella.

30s: Go pro

“I didn’t have a background in finance and nor did I have a head for numbers, but nothing stopped me from reading up when I was planning for retirement. The beginning was boring but eventually I learnt so much that it was worth it,” says Sharma. The Intelligent Investor by Benjamin Graham, Common Stocks & Uncommon Profits by Philip Fisher, and Little Book of Common Sense Investing by John C. Bogle are his top recommendations.

When planning your investment budget, Sharma offers the ‘six fold rule’: save a minimum of six times your average monthly expenditure before you begin investing. For example, if you spend an average of Rs 10,000 a month, you should ideally have a minimum of Rs 60,000 set aside first.

Do away with your debt, get rid of credit cards and scatter your savings, Sharma adds. “Debt is a drain. When I got my retiral benefits, I first cleared my debt, choosing security over returns.”

Another trick to minimise risk is to diversify. You could put a small amount into a potentially risky investment, but dedicate a chunk of your savings towards long term returns.

40s: Better late than never

Being a late bloomer isn’t that big a deal if you make sure to tick all the boxes. “Play safe because what is at risk are your retirement funds and not a steady flow of cash,” says Sharma.

He also recommends building a group of people in a similar situation as you, who you can bounce ideas off. Identify those who are trustworthy and well-versed with topics you might not have a strong grasp on. Different perspectives help paint a clearer picture of what you might be getting into.

Another hack to planning for retirement is to ask yourself one simple question – “Do I really need this?” Curb impulsive buys and avoid extravagant indulgences. Saving is equally, if not more, important than investing.

According to Sharma the one golden rule to ace planning for retirement is to “Take small but consistent steps.”