These are a set of slides on retirement planning that I have used at investor workshops and corporate meets. The aim is to quickly convey the importance of retirement planning to young earners.
1. Imagine how your monthly income will evolve in the future
![how your monthly income will evolve in the future](https://freefincal.com/wp-content/uploads/2015/01/Retirement-planning-1-1.jpg)
The abrupt stoppage in income represents retirement.
2. Now imagine how your monthly expenses will evolve in the future
![how your monthly expenses will evolve in the future after retirement](https://freefincal.com/wp-content/uploads/2015/01/Retirement-planning-2.jpg)
Obviously expenses do not stop when income stops. So those who do not have the means to account for expenses when income stops better hope they are dead on or before retirement!
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! 🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
The expenses in the above graph seem to head for the roof. Let us rescale it over our expected lifetime.
![Re-scaled monthly expenses evolvution after retirement](https://freefincal.com/wp-content/uploads/2015/01/Retirement-planning-3.jpg)
In about 15 years after retirement, the monthly expenses, thanks to inflation, is higher than the last drawn pay!
Meaning that if I had an (imaginary) monthly pension that equals my last drawn pay, I would only be financially independent for about 15 years after retirement. So we need to do a lot better!
![If monthly pension equals my last drawn pay](https://freefincal.com/wp-content/uploads/2015/01/Retirement-planning-4.jpg)
The sad truth is actual pensions (be it from a pension plan or employer-provided annuity) are much, much lower than the last drawn pay—something like this.
![The reality of practical pensions!](https://freefincal.com/wp-content/uploads/2015/01/Retirement-planning-5.jpg)
Therefore, for your own sake, tell yourself that a pension is not enough for financially independendent retirement.
Instead, think of inflation-protected income (blue dot within the red circles below)
![Illustration of Inflation-protected income](https://freefincal.com/wp-content/uploads/2015/01/Retirement-planning-6-new.jpg)
To generate this inflation-protected income, you need a corpus that is between ~ 25-35 times (depending on inputs) your annual expenses at the time of retirement (the earliest green dot). As you withdraw more and more from the corpus, it decreases and drops to zero, hopefully when you die, and only when you die. Ensuring this is the third stage in retirement planning.
The second stage is to ensure our investments grow and hit the first green dot when we retire.
![Managing to invest enough for retirement](https://freefincal.com/wp-content/uploads/2015/01/Retirement-planning-7.jpg)
We need to do two things to grow the corpus. 1. Choose a productive but diversified portfolio; 2. Invest
![A constant monthly investment maybe too high](https://freefincal.com/wp-content/uploads/2015/01/Retirement-planning-8.jpg)
One cannot choose to invest a constant sum because the monthly investment to be made immediately will be much larger than monthly expenses. The above graph has a logarithmic y-axis, and hence the lines appear linear.
To ease our burden, we can instead choose to increase our investment each year from now until retirement.
![Aim to increase monthly investment by at least 10% each year](https://freefincal.com/wp-content/uploads/2015/01/Retirement-planning-9.jpg)
This would imply we must strive to invest as much as we spend.
This is easier said than done. Let us have a look at the second graph again.
![how your monthly expenses will evolve in the future after retirement](https://freefincal.com/wp-content/uploads/2015/01/Retirement-planning-2.jpg)
In this picture, the gap between the monthly salary and monthly expenses increases as we approach retirement. If this is how our lives pan out, then we can manage to invest as much as we spend with a little effort and discipline.
Unfortunately, our expenses tend to grow in steps, as shown in green below.
![How mnothly expenses increase in reality due to lifestyle creep](https://freefincal.com/wp-content/uploads/2015/01/Retirement-planning-10.jpg)
Call it lifestyle creep if you like. If we embrace every new technology that arrives, if we cannot distinguish between our needs and wants, if we succumb to peer pressure and buy what others buy, we will never be able to invest enough.
Meaning we are sowing the seeds for our future financial doom today.
Lifestyle creep, the desire to spend for today and enjoy when young, resides in all of us. What is needed is a definite boundary: We can spend the way we wish as long as we can manage to invest as much as we can.
Safeguarding that boundary is the first and foremost step of retirement planning.
If you want to get started with your retirement planning, our robo advisory tool will help you create a complete financial plan.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
![Follow Freefincal on Google News Follow Freefincal on Google News](https://freefincal.com/wp-content/uploads/2023/07/Follow-Freefincal-on-Google-News.jpg)
![Subscribe to the freefincal Youtube Channel Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.](https://freefincal.com/wp-content/uploads/2023/07/Subscribe-to-the-freefincal-Youtube-Channel.jpg)
![Follow freefincal on WhatsApp Channel Follow freefincal on WhatsApp Channel](https://freefincal.com/wp-content/uploads/2023/09/Follow-freefincal-on-WhatsApp-Channel-300x83.jpg)
![Listen to the Lets Get Rich with Pattu Podcast Listen to the Lets Get Rich with Pattu Podcast](https://freefincal.com/wp-content/uploads/2023/07/Listen-to-the-Lets-Get-Rich-with-Pattu-Podcast.jpg)
![Lets Get RICH With PATTU podcast on YouTube Lets Get RICH With PATTU podcast on YouTube](https://freefincal.com/wp-content/uploads/2023/08/Lets-Get-RICH-With-PATTU-podcast-on-YouTube-644x362.jpg)
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
![Pattabiraman editor freefincal](https://freefincal.com/wp-content/uploads/2019/11/Pattabiraman-author-freefincal-article-bottom.jpg)
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
![Both boy and girl version covers of Chinchu gets a superpower](https://freefincal.com/wp-content/uploads/2021/02/Article-bottom-Chinchu-gets-a-superpower-front-cover-for-girls-and-boys.jpg)
![Feedback from a young reader after reading Chinchu gets a Superpower (small version)](https://freefincal.com/wp-content/uploads/2021/02/For-bottom-Feedback-from-a-young-reader-after-reading-Chinchu-gets-a-superpower.jpg)
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
![You can be rich too with goal based investing](https://freefincal.com/wp-content/uploads/2016/11/You-can-be-rich-243x300.jpg)
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
![Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you want](https://freefincal.com/wp-content/uploads/2017/05/2-mini-Cover-pink.jpg)
Your Ultimate Guide to Travel
![Travel-Training-Kit-Cover-new](https://freefincal.com/wp-content/uploads/2019/11/Travel-Training-Kit-Cover-new.jpg)