“Look Who’s here !! Mr. Desai, Good to see you.” said Mr. Suren Mehta, a retired banker. He was sitting with few other friends, Mr. Ajit Khanna and Mr. Rajat Ghosh, in a park as their daily routine in retirement days. He suddenly saw Mr. Srikant Desai, a retired professional coming towards them, when he said this.
“Good to see you all too.” said Mr. Desai.
“Let me introduce you all to my friend, Shrikant Desai. He is the happiest retired person I have ever met. He exercises, spends time with his grandchildren, goes on vacation with family and enjoys his retirement to the fullest.” Said Mr. Mehta to Mr. Khanna and Mr. Ghosh.
“You’re a lucky Man” said Mr. Khanna. “I have 2 daughters. I took loan against my PF and LIC policies and got them married in a grand fashion. Now, I am left with meagre amount to fund my retirement. I wish, I had a son who could fund my retirement.”
“Not Really” said Mr. Ghosh. “I have 2 sons. But none of them gives me enough money to enjoy life like Mr. Desai. And the annuity I earn from my policies, is hardly enough to survive. I can’t even dream of such luxuries. Retired life looks like a curse now.”
“I disagree with both of you” smiled Mr. Desai. “Your retirement planning doesn’t (rather shouldn’t) depend on whether or not you have son or daughter. It all depends on how well you have planned for your retirement.”
“We had all planned for our retirements. All of us had few policies and post office certificates for our retirement”. Said Mr. Mehta. “Additionally, we had our PF amount with us. All put together we had some Rs. 10-15 lakhs for our retirement.”
“There you are. You had only invested in traditional debt instruments which could not grow your wealth in line with inflation. As a result, you had a smaller kitty for your retirement. This amount might have appeared big during your young age. But today you realise that it is small.
To make things worse, Mr. Khanna dipped into his retirement corpus to get his daughters married in a grand fashion.” Said Mr. Desai.
“But in our community, it is mandatory to have a grand wedding ceremony Mr. Desai. Also, doesn’t a father aspire that he celebrates his daughter’s wedding in the best possible way?” asked Mr. Khanna.
“Well, may be. But the question is, if that was your aspiration, why didn’t you plan for it separately? How can a grand wedding ceremony be a justified expense at the cost of your retirement?” asked Mr. Desai.
“I think you are right Mr. Desai.” Said Mr. Mehta. “So according to you what is the right thing to be done ? Rather what’s the secret you followed that today you are so relaxed?”
“Let me Guess. Your Son financially supports you pretty well.” Said Mr. Khanna.
“Let me also Guess. You had inherited huge wealth from your father”. Said Mr. Ghosh.
“Both of you are incorrect.” Said Mr. Desai. “I inherited nothing but a small house to live from my father. Also, me and my son are financially independent. We live together and morally support each other, but neither he seeks financial support from me neither do I seek financial support from him. I think this is one reason that makes me feel proud of him and proud of myself.
I had decided to start planning for my retirement at an early age of 25. Also, I realised that only debt instruments cannot create wealth for me. Thus, I chose the way of equity which created good wealth for me. I started saving small amounts starting from Rs. 500 p.m. gradually growing to Rs. 1,000 p.m. then Rs. 2,000 p.m. and so on as my income grew.
Last year, I retired with a wealth of more than Rs. 2 Crores which I invested in Tax Free Bonds and now earning around Rs. 16-17 Lakhs p.a. as tax free interest. And I still have some Rs. 40-50 Lakhs in diversified equity funds so that I continue to beat inflation hereafter.”
“That’s great Man. What a farsightedness !! But you know what? Equities aren’t everybody’s cup of tea. It requires lot of research to find the right stocks.” Said Mr. Mehta.
“You are right. So if you can’t find so much time to research for equities, you can choose the route of Mutual Funds. And if even researching Mutual Funds is also difficult for you, go for a fees based financial advisor.” Said Mr. Desai.
“But I always thought equities are risky.” Said Mr. Khanna.
“Equities are volatile in the short term. But in the long term, they are the true wealth creators. Also, let us analyse the risk of not investing in equities. Look at all your equity-less portfolios. Isn’t that a bigger risk that your retirement wealth is far below required as you couldn’t beat inflation?” said Mr. Desai.
“But aren’t sons supposed to fund our retirement? We do so much for them. I still remember, I gave them everything they asked for, even if it was stretching my budget. At times, I ignored my parents’ requirements to fulfill my sons’ wishes. But today, all they care about, is their children. We don’t exist for them.” Said Mr. Ghosh in an agitated voice.
“Here come the double standards. You say that when you ignored your parents to fulfill your sons’ wishes, you were right. But if your sons ignore you to fulfil their children’s wishes, they are wrong. Why so? Also, you said, that you stretched your budget to fulfil their demands. Now ask this question to yourself, whether it was a need or desire that your children demanded? If it was a need, then its ok. But if it was a desire, and you gave up your retirement planning to fulfil it, then the only person to be blamed is you, not them.” Said Mr. Desai.
“That ways I am kinda lucky” said Mr. Mehta. My Son gives me some money every month for my expenses. Also, he fulfils the demands of his children. So I would say, he is an ideal son and ideal father.”
“I would agree only if you tell me, that after all this, he is still able to save and invest for his retirement.” Said Mr. Desai.
“Well, I am afraid, not.” Said Mr. Mehta. “These days expenses are so high that after doing all this, he is hardly left with any money.”
“In that case, I would suggest you to become his mentor and tell him to start saving some money. In fact, don’t take me wrong, but your son is facing this problem because of your lack of planning. If you had planned your retirement well, the money he is giving you could have been invested towards his retirement.” Said Mr. Desai.
“So what should I do now?” asked Mr. Mehta.
“Please tell your son to prepare a budget for his monthly expenses and try to curtail those which are unnecessary. This money needs to be necessarily invested towards his retirement so that he doesn’t have to financially depend on his son. Today, my son Niraj is not only handling the household expenses very well, but is also saving and investing around 20-25% of his income towards his retirement. This way he is not only securing his own retirement but is also taking off the responsibility from his Son. In a way, he is helping his son by planning his own retirement.” Said Mr. Desai.
“Isn’t it our culture that our best retirement planning is to invest in our children?” asked Mr. Ghosh.
“That’s only half the truth” smiled Mr. Desai. “The fact is, we Indians have a culture to save for our future. In your young age, future is 2 things i.e. your children’s working life and your retirement. Now, when you give good education to your children, you are done for their future. But for your retirement, you still need to save and invest. In fact, Western Countries had a culture of not saving for retirement. There, the government had enough resources to take care of the retired. But you will be surprised to know, that the trend is changing there too, now. They have started saving for their retirement. So even ‘culturally’ we should be saving and funding our own retirements.” Said Mr. Desai.
“You have opened our eyes today” said Mr. Ghosh, Mr. Mehta and Mr. Khanna to Mr. Desai.
“Thanks for the compliments. A few last words which I would like to share with you:
1. There has been a trend of old age parents being deserted by their children as they cannot financially support them. But if we want to curb this problem, the first step is to start saving and investing for your retirement. So this is not only a social issue, but a case of lack of planning.
2. Tomorrow, when your children grow up, they will have enough liabilities including household expenses, home loans, children’s education, self-retirement etc. Make sure that YOUR lack of planning doesn’t mess up their finances. In fact, if you say that you care for your children, show this care by doing retirement planning for yourself.
3. Blowing up money in daughter’s marriage is an extremely bad idea, especially when you have dip into your retirement money. Rather, help her find a good match and provide your blessings. If you have saved some amount for her, give it to her than blowing it up. That would provide some financial security to her. (Please don’t confuse this with dowry.)
4. Your investments have to necessarily take care of inflation. If your money grows slower than inflation, your retirement planning is on the verge of collapsing.
5. Times have changed and they will always keep changing. So keep an open mind to keep up with the times.
6. Last but not the least. Retire from Work, not from Life.”
We look forward to your valuable comments and feedback.
The Author Prof. Saurabh Bajaj is CEO with Nidhi Investments, Mumbai. He may be contacted on CEO@nidhiinvestments.com if you have any questions.
(The views mentioned in the article are personal opinion of the author)