How to do Retirement Planning at different ages?

By Nivesh Gyan   20 June

Category: Retirement Planning

retirement planning, retirement planning at different ages


Life after retirement is like second innings of one’s life after years of hard work. It is time when one gets to fulfill their dreams like traveling or pursuing a hobby. To live a comfortable retired life, one requires a regular flow of income which should be planned when you are earning. For this, not only consistent saving is important but also investing in the right instrument to build a retirement fund corpus that can ensure a regular flow of income for the retired life. We would be discussing, with the help of real-life examples, how one can plan investments at different life stages:

Retirement planning at the age of 30:

Mahesh, a 30-year-old just started working in an MNC. His salary was Rs. 25,000 from which he was just saving around Rs. 1,000 per month. His monthly expenses include:
Household exp.: 14,000
Personal Exp.: 10,000


Mahesh was living from paycheck to paycheck every month. He shared his problem with his friend who suggested him to visit a Financial Advisor. Financial Advisor explained to him the importance of saving and investing in the right instruments to build long term wealth. He also explained 50:30:20 Budgeting Rule in which 50% of the salary will be spent on household expenses, 30% will be spent on Miscellaneous Expenses and the remaining 20% should be saved.


Mahesh started to work on cutting down some impulsive expenses and started saving for future needs such as purchase an own house, car, Child Education and most importantly “Retirement Planning”.


Mahesh would require a corpus that would meet his post-retirement expenses and for other activities like purchase of own vehicle, for a vacation, etc.


Mahesh took the advice of Financial Planner and invested a part of his monthly savings in Mutual Funds through Systematic Investment Plan (SIP). Since Mahesh has a lot of time until retirement (30 years assuming a retirement age of 60 years), his portfolio would have maximum exposure towards equity i.e. a minimum of 80%. Rest 20% is invested in Debt Fund as an Emergency Fund which can be withdrawn as per the needs of the investor. Also, Past performance shows that Equity Funds have delivered 12-15% returns.


By starting a Monthly SIP of Rs. 5,000 (Rs. 4,000 in Equity and Rs. 1,000 in Debt), Mahesh created a corpus of Rs. 1.92 crores (Rs. 1.76 crores from investing in Equity and Rs. 15 lakhs from Debt) in 30 years at an indicative rate of return 13% and 8% respectively.
Mahesh got the right advice from his Financial Advisor and started investing at the right age and lived a stress-free retired life.

Retirement planning at the age of 40:

Ramesh, a 40-year old was working in an MNC earning Rs. 1,50,000 per month. His monthly expenses include:
Household expenses of Rs. 75,000
Other Expenses of Rs. 45,000


Note: Ramesh was already following 50:30:20 Thumb Rule of Budgeting in which:
50 %: Household expenses like Household products, Rent, Child education, Insurance, etc.
30 %: Miscellaneous Expenses like Shopping, Hobbies, etc.
and, 20% of the salary was saving


From his monthly salary, Ramesh saved around Rs. 30,000 per month. Most of the expenses like Child Education, Purchase an own house, etc. were met. Most importantly, Ramesh didn’t do any planning for his retirement. He thought that by keeping the savings in the bank account, he could make a corpus for post-retirement expenses. Since he was planning for his retirement, his friend suggested him to visit a Financial Planner.


Financial Planner told him to invest in an instrument that can beat the rising inflation, i.e. Mutual Funds. He explained that returns from mutual funds are much higher than that from RD/FD. According to Section 80C of the Income Tax Act, an investor can avail tax benefit of up to Rs. 1,50,000. So, by investing in mutual funds you can grow your income and save tax at the same time.


To meet post-retirement goals, Ramesh started investing in mutual funds. As per the Financial Advisor, the portfolio of Ramesh would include the following schemes:


SIP of Rs. 10,000 in Liquid / Short-term Debt Fund
SIP of Rs. 7,000 in Hybrid Equity Fund
SIP of Rs. 5,000 in Multi-cap Fund
SIP of Rs. 4,000 in Midcap Fund
SIP of Rs. 4,000 in Smallcap Fund


To meet the uncertainty within a year, Ramesh can withdraw from money invested in Liquid Funds. After a year, if the fund is not used, the return generated can be invested in an equity fund for 20 years.


Ramesh got the right advice and started investing as advised by Financial Planner. By starting a monthly SIP of Rs. 30,000, Ramesh created a corpus of Rs. 2.3 crores in 20 years at an indicative return of 13% p.a.which can be used to satisfy his post-retirement goals.


Ramesh didn’t start his retirement planning early, but he still created a huge corpus. But you’ve got time to make a huge corpus. So, what are you waiting for? Start investing in mutual funds with as low as Rs. 500 today!