This is how I plan to achieve five crores for retirement

Published: October 1, 2020 at 10:59 am

In this edition of reader story, let us peruse a message from Virendra (published with permission) about how he set his finances in order with the help if goal-based investing. In particular, how the result of a retirement calculator drove him into action. His journey is similar to mine – driven by the fear of making the same mistakes again and Sandeep’s shared earlier: We lost sleep after using a retirement calculator! This is how we recovered.

About reader stories: In this category, we showcase the money management experiences of readers. Check out some popular articles: (1) What 25 Years of Tracking Expenses Taught Me(2) How I achieved the dream of an own house & became debt-free by 36(3) I met an accident the day I got married and learned key money lessons (4) How I turned my life around & charted my money course (5) I achieved financial independence at 35: My journey and lessons and (6) At 23 I put my finances in order by asking “what would make me a bad investor?”

You can also explore the full reader story archive. Do contact us, if you have a story or know of a friend’s account that the DIY community would benefit from. Editor’s note: To preserve the emotions of the author’s journey and their thinking process, reader stories are published in an as-received format including the references to freefincal – which we are grateful for and unfortunately cannot be edited out without modifying the spirit of the article.

My name is Virendra. I am 30 years old, married with a working spouse. One day while watching YouTube videos about finance, I got a recommendation about freefincal and since then, not a day has gone by where I have not watched/read freefincal videos and articles.
I had assumed that index funds are the way to go with getting on average 15% returns at low cost. (how silly that sounds). Reading your articles, watching your videos gave me a good idea where I stand. I was nobody. Had no idea about financial goals and how to plan them. How to reduce risk (why it’s important) I was mesmerised by content you had posted. Lessons learnt were, 1. higher risk doesn’t mean higher returns and
That is when I started becoming serious about goals. I have a habit of writing down my expenses to every penny I spend since last September. I was actually very proud of that habit but when I read your article that tracking expenses are of no use, instead, track investments I again felt lost. Tracking expenses at least helped me to see how much I spend and where. Miscellaneous was always the column with the highest spend.
I put these numbers in the freefincal DIY retirement calculator and was shell shocked to see the final amount needed at age 55, which was more than 5crs. I couldn’t believe it and did that calculation, again and again, to see the amount increase by little but never came down. That is when I realised the importance of financial planning.
Freefincal made me understand financial literacy is very important, and that is when I started planning for retirement and future need of my children. Considering my retirement at age 55, I understood I have time on my side and can plan accordingly. We got married a year and a half ago and have no children as of yet. But as per your advice, I have made two portfolios one for retirement and one for future needs of my child/children.
I got how much I need to invest every month from your calculator. I have decided to have one aggressive hybrid fund, one nifty index fund and one nifty next 50 index fund as my equity portion of the portfolio is 40-40-20% for both my goals. I know there would be overlap between a large cap index fund and aggressive hybrid fund, but I am ok with it till 45% for the downside protection it would provide to the core of my portfolio. For the debt part, I am using ten years constant maturity gilts for my retirement.
 Till now, my portfolio is debt-heavy with only PPF, which I will use for my children need as debt component. It will be very hard to make this allocation even close to 60-40 because of considerable amount, but I will try to do it as quickly as possible.
I chose all my funds by doing inky pinky without considering star ratings. (I am a good student I guess).
I have made an excel sheet to track investments from this year till 2045,
 the year when I will turn 55. I am going to try and increase my investment by 5% every year. I am going to start with 70% equity and 30% debt allocation for both my goals. Every five years, I will decrease equity allocation to make sure that as I near my goals, I do not hold high equity portions. I have assumed returns of 10% from equity and 8 % from debt (very high) for the sake of calculations in the hope that at the end I will have enough corpus for my needs. I did this with my wife by my side, and she also understands how to invest. I kept the retirement portfolio under my name and children portfolio under her name to make her equal partner in everything we do. I am not doing SIP on my name, but I have a SIP on her name just to make her less burdened to manually invest every month.
We have considerable health insurance from our employer 12 Lacs to be precise, and I have got a term life insurance of 2cr. I also have direct equity which I am building for growth and gives me good liquidity.
Before doing this planning, I have kept aside emergency fund and have a small SIP with an arbitrage fund apart from above-mentioned funds in the same. My goal is to make sure in the coming ten years, I am worth half of my term insurance value and should not need an emergency fund after that.
Right now, we live in a rented house, but we will plan to buy a house soon. Both my parents are government servants who will have considerable pensions after their retirement; hence they won’t be financially dependent on me. (Rather will be moral support for me). They will live with me after their retirement.
I am not sure if I am suitable for passive investment, but I am willing to find it out.
I hope to control my emotions rather than emotions controlling me. I hope to be rich one day with a bit of luck.
Please join me in thanking Virendra for sharing his journey and in wishing him the very best in future.

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About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association, IIST Alumni Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
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