Retirement Income Planning

When Bunny in Yeh Jawani Hai Deewani said in that dialogue – 𝟐𝟐 𝐭𝐚𝐤 𝐩𝐚𝐝𝐡𝐚𝐢, 𝟐𝟓 𝐩𝐞 𝐧𝐚𝐮𝐤𝐫𝐢, 𝟐𝟔 𝐩𝐞 𝐬𝐡𝐚𝐚𝐝𝐢, 𝟑𝟎 𝐩𝐞 𝐛𝐚𝐜𝐡𝐜𝐡𝐞, 𝟔𝟎 𝐩𝐞 𝐫𝐞𝐭𝐢𝐫𝐞𝐦𝐞𝐧𝐭..’, being a boring life, I guess we all agreed. After having multiple discussions with people, I realised that being a corporate employee even with a decent salary, between rent, bills, and trying to have a social life, saving for the future often takes a backseat. And retirement? That's a concept that feels even more distant. I have always believed that retirement is not meant to be done at 60 as society says. It should be done on your terms. To calculate your retirement savings needs, follow these steps: 📌Estimate Monthly Expenses: Determine how much you will need monthly during retirement. A common guideline is to aim for 70-80% of your pre-retirement income. 📌Determine Retirement Duration: Estimate how many years you will be in retirement based on your expected life expectancy. 📌Calculate Total Retirement Needs: Multiply your estimated monthly expenses by 12 (to get annual expenses) and then by the number of years you expect to be retired. 📌Factor in Inflation: Adjust your calculations for inflation. Use an expected annual inflation rate (typically 3-4%). 📌Calculate Required Retirement Corpus: Use the formula: Corpus= Withdrawal Rate/Annual Expenses A common withdrawal rate is 4%. 📌Monthly Savings Calculation: Determine how much you need to save monthly to reach your target corpus by retirement age, using a retirement calculator or the future value of a series formula. By the way, are you saving for retirement or just saving to stop working? Shift your mindset to create a fulfilling post-work life. LinkedIn LinkedIn Creator's Club LinkedIn News LinkedIn News India LinkedIn Life #financialfreedom #financialliteracy #retirement #linkedin

Most retirees spend decades saving, deferring taxes, and building a retirement nest egg. But when it’s time to withdraw, they follow the traditional advice: “Spend taxable accounts first, let tax-deferred accounts grow.” That’s the mistake. By deferring too long, they stack up massive RMDs in their 70s. And this pushes them into higher tax brackets just when they thought they’d be paying less. I’ve seen it happen over and over again. Clients assume their tax bill will shrink in retirement.  Instead, they’re hit with: - Higher Medicare premiums → IRMAA surcharges catch them off guard - More of their Social Security taxed → because of income thresholds. - Less flexibility → because RMDs are mandatory, whether they need the money or not. This isn’t just bad luck—it’s bad planning. We need to help clients control their tax brackets, not just defer taxes blindly. That means: - Strategic Roth conversions early → locking in lower rates while they can. - Blending withdrawals → taxable, tax-deferred, and tax-free for bracket control. - Using tax-efficient investments → because unnecessary capital gains make things worse. The reality is, without a plan, retirees can end up paying more than they ever expected. And by the time they realize it, it’s too late to fix.

During annual reviews and meetings with new prospective families, I have been reviewing a plethora of 401k plans and documents. I wanted to share my 4 BIG takeaways and provide potential real-life next steps for you to consider. ☑ Don’t Save Too Fast In almost every other area of life, saving and investing more is encouraged. With an employer-sponsored retirement plan, that is not always the case. In many plans, you only get your employer match during the period you make contributions. In other words, if you max out your plan before the final paycheck of the calendar year, you could be forfeiting a portion of the employer match. You must understand your employer's plan. Fortunately, every plan must make a plan document available to you upon request. Your plan provider can provide a wealth of insight with a simple phone call. ☑ Beneficiary Designations While this one might seem obvious, mistakes happen way too often. Find the beneficiary tab of your employer plan online and confirm you have the correct beneficiaries. Common mistakes: parent instead of a spouse, ex-spouse, minor children ☑ Breaking Up with Your Target Date Fund For most employer-sponsored retirement plans, your investment contributions go to a target date fund by default. This is based on the year that you turn 65. For example, if you were born in 1980, your default investment option might be the ABC Target Date 2045 Fund. I do not think a person’s age should determine how their investments should be allocated. On average, I see that the average expense ratio in large employer plans is generally 0.40 to 0.45%. Inside the TDF, the fund allocates the funds to a combination of U.S. and International Stocks, Bonds, and cash. If you have a written financial plan, it should detail the investment asset allocation to help you optimally pursue funding your dreams. This could often be achieved by selecting 3-5 index funds without your 401k lineup. I see that passive index funds have an average expense ratio of 0.05%. ☑ Rebalance and Redirect When changing from target-date funds to your own mix of index funds, there are essentially 3 critical steps. First, you need to rebalance your existing holdings to the desired mix. Second, you need to re-direct future contributions to the desired mix. Finally, you need to select a date to do an annual rebalance. Hopefully, the plan provider will have an option for you to select to make this happen automatically. ★ Conclusion In a recent Vanguard study, Vanguard attempted to quantify the value of advice. They suggest that financial planners can add .45% of value by recommending low-cost index options and .35% for rebalancing. Hopefully, by reading this post, you improved your lifetime annual returns by 0.80% per year. Cheers, Nic #National401kDay

Both of them have been working in the MNC for 2 decades. After their daughter left Malaysia to further her study in Australia, they decided it was time to relook back at their plan, especially on their retirement. During the meeting , I could see their excitement when they shared their retirement plans, unlike the first time when I first met up with them. They were clueless about what they really want for their retirement life, and how they want it to be like. Frequently,  people who are planning on retiring tend to miss out some of the scenarios that  might be facing during retirement life. As a result, before you start planning for your retirement, here are questions that you may need to ask yourself  ❓How much afford you can live on ❓How much do you want to spend during your retirement ❓How long will your retirement fund last ❓Do you still generate cash inflows during your retirement ❓Do you intend to downsize or maintain  your lifestyle ❓Do you have sufficient medical coverage after your retirement ❓Do you have enough emergency funding after your retirement ❓Do you still have a loan commitment after your retirement ❓Do your estate plan up to date Last and least , not forgetting the inflation rate! Retirement isn’t just about spending time living a life of leisure. It is also about organizing your finances to provide enough income to last through retirement while adjusting for market conditions and your needs as you age. The decisions made in the pre-retirement phase can have serious and lasting effects, here are some of the most common mistakes to avoid before retirement. ❌Not getting an early start ❌Carrying too much Debt ❌Putting your money in one place ❌Ignoring inflation ❌Underestimate how long you will live  ❌Underestimate medical cost  ❌Overestimate your nest eggs ❌Cashing out your saving before retire ❌Neglecting to plan for long term care  ❌Neglecting estate plan Remember once you retire, you will no longer receive a regular income. And to sustain your daily expenses and live your golden years you will need a financial backup. When you plan for your retirement, it's important to plan carefully and set realistic goals to ensure you have enough for your golden years. Many may look at  retirement as the last thing to think of. However, as the saying goes, “time flies.” It’s never too early to start planning for your future . 10 years down the line or decades later, your future self will thank you for the preparations and plans you make today. So don’t delay it, start now! #Vivfpjourney #financialplanning #retirementplanning

A 38-year-old, retired with ₹8 crore, now spends his days at a counselling centre. He worked relentlessly for 18 years, built a massive corpus, and decided to go “FIRE” because many of his US friends were doing the same. ₹8 crore is enough… right? Single, no kids, no major obligations, investments that can fund 30–40 years. Yet here he is…depressed and having suicidal thoughts. Because while he planned for FI (Financial Independence), he never planned for RE (Retire Early). And this is the mistake many 25- to 45-year-olds are making today. They assume financial independence = early, comfortable retirement. It’s not. These are two different concepts. Mixing them can ruin your mental health. Financial independence gives you the freedom to choose… work less, change careers, travel, start a business… without worrying about bills. But it doesn’t mean you can or must retire early. Retirement ends active work and structure. Without purpose, it can quickly become lonely, exhausting, and frustrating. Your friends will still be working. Your partner (if any) will have their own routine. Family will be busy. The “freedom” can soon feel like emptiness. Financial independence can fund your life. But it can’t give it meaning. So if you’re planning early retirement alongside financial independence, you must also plan how you’ll use your time and energy once you stop working… how you’ll keep your body, mind, and brain active. Whether it’s through hobbies, travel, consulting, side-hustles, volunteering, or learning… You must follow what gives you a routine, growth, and connection. Retirement without purpose is a recipe for depression and anxiety, which even ₹20 crore can’t compensate for. So, don’t blindly chase FIRE without planning for the life that follows.

Chart of the Week (Bonus): 4 financial risks in retirement After years of saving for retirement, once you’re in retirement, your focus can shift to preserving and protecting the wealth you’ve built, along with using your savings to preserve and use assets for what you saved for. Four risks: 1️⃣ Sequence of returns risk - the risk that experiencing negative returns early in the retirement withdrawal process can seriously impact how long your retirement savings last. Plan for this risk: Maintain a short-term reserve of low-risk investments to tap to cover expenses, if needed, instead of tapping stocks in a down market. 2️⃣Longevity risk – the risk that you’ll outlive your retirement savings. Plan for this risk: Consider an income annuity that can help guarantee income payments for a set number of years, or for the rest of your life. 3️⃣ Inflation risk – the risk of lowing purchasing power of your savings over time. Plan for this risk: Stay invested in equities. While past performance does not guarantee future results, our research has shown that equities have historically been an effective defense against inflation. 4️⃣ Unexpected expense risk – the risk that large, unexpected expenses can throw your retirement plan off track. Plan for this risk: Maintain a healthy emergency fund. Retirees should have enough cash on hand to cover a year of spending, and an additional 2 to 4 years of spending saved in relatively liquid, stable investments like CDs or high-quality short-term bonds. A plan, ideally, addresses each. #wealthmanagement #retirementplanning

𝗠𝗼𝘀𝘁 𝗚𝗲𝗿𝗺𝗮𝗻𝘀 𝗱𝗼𝗻'𝘁 𝗵𝗮𝘃𝗲 𝗮 𝗰𝗹𝘂𝗲 𝗮𝗯𝗼𝘂𝘁 𝘁𝗵𝗲𝗶𝗿 𝗿𝗲𝘁𝗶𝗿𝗲𝗺𝗲𝗻𝘁 𝘀𝗮𝘃𝗶𝗻𝗴𝘀. But it's not their fault. The system is designed to keep them in the dark: – Paper statements once a year 📬 – No clear overview of gains vs. contributions – Zero context about performance vs. expectations It’s like flying blind into retirement. At 𝗣𝗲𝗻𝘀𝗶𝗼𝗻𝗳𝗿𝗶𝗲𝗻𝗱, we decided to fix that. We just redesigned the Investments section of the app to answer three simple questions: Is my plan on track? 1. See your actual performance vs. the original projection – including annualised returns and YTD stats. What’s my money worth? 2. Instantly see how much you’ve paid in vs. how much it’s grown. Gain/loss in € – no guesswork. Where is my money invested? 3. Clear donut charts + full fund breakdown. Know which funds are driving your performance – and how diversified you really are. Oh, and one more thing: You can now earn 100€ for every friend you refer. They invest in their future → you get rewarded. Simple. This is what modern retirement investing should look like: ✅ Transparent ✅ Data-driven ✅ Designed for real people If your current pension provider makes you feel confused or ignored, maybe it’s time to switch 🤝 

The IHT changes to pensions announced in yesterday’s Budget are seismic, and it will affect many UK families, not just super high earners with enormous pension pots. 🥺 Most ‘working people’ have for some time built up their pensions pots through risk and fund based defined contribution plans. 📈 (Unlike the public sector that enjoy “gold-plated” defined benefit schemes which provide a guaranteed, index-linked income for life in retirement.) 🌟 To recap, if you die with any pension pot left, then it will be subject to IHT. This is regardless of whether you die before or after 75 years of age. 😟 Your pension trustees will be expected within 6 months of your death to calculate the IHT and pay it to HMRC. What’s left after that can be paid to your successors, but if you were over 75 years old at death, they will also be subject to income tax. 😱 Let’s take a £2m pension pot (assume nil rate band used up already), so that’s £800k in IHT, leaving £1.2m to pay to your heirs. They will pay 45% income tax, a further liability of £540k, meaning that your heirs are left with only £660k from a £2m fund. That’s an effective rate of tax of 67%!!! 😫 However, let’s also take a £500k pension pot (assume nil rate band used up already), so that’s £200k in IHT, leaving £300k to pay to your heirs. They will pay up to 45% income tax, a further liability of £135k, meaning that your heirs are left with only £165k from a £500k fund. That’s also an effective rate of tax of 67%!!! 😫 However, the 25% tax-free cash allowance remains, and I expect to see many using this element as an effective estate planning strategy moving forwards in an attempt to remove it from the 40% IHT tax charge. 😊 Sensible and robust pension advice has never been more important. 👍 #budget2024 #pensions #tax #iht #advicealpha #sjpwealth

How Much Should You Have in Your Pension by Age 60? By age 60, many envision a future of leisure and financial freedom. However, the stark reality is that the average pension pot for individuals aged 55–64 in the UK stands at approximately £137,800 . This figure falls significantly short of the amount needed for a comfortable retirement. Defining Retirement Standards The Pensions and Lifetime Savings Association (PLSA) outlines three retirement living standards: Minimum: £14,400 annually for a single person, covering basic needs with limited leisure. Moderate: £31,300 annually, allowing for some luxuries like a yearly holiday and dining out. Comfortable: £43,100 annually, affording more extensive travel and leisure activities . These standards assume no mortgage or rent payments. The State Pension Factor The full new State Pension provides £11,502 annually . While this contributes to retirement income, it doesn't suffice for a moderate or comfortable lifestyle. Target Pension Pots To achieve desired retirement standards, consider the following pension pot targets: Moderate Lifestyle: Approximately £490,000 needed, assuming a 4% annual withdrawal rate over 25 years . Comfortable Lifestyle: Around £790,000 required under the same assumptions. Pension Savings Benchmarks by Age Age 30: Aim to have saved 1x your annual salary. Age 40: Target 3x your annual salary. Age 50: Strive for 6x your annual salary. Age 60: Aim for 8x your annual salary. These benchmarks provide a general guideline on whether you're on track with your retirement savings. Savings Rate Guideline A commonly recommended approach is to save a percentage of your income equivalent to half your age when you start saving. For eg: Start at age 20: Save 10% of your income annually. Start at age 30: Save 15% of your income annually. This strategy accounts for the compounding effect of early savings and adjusts for later starts. Retirement Income Replacement To maintain your pre-retirement lifestyle, aim to replace approximately 50% to 60% of your pre-retirement income annually during retirement. This accounts for reduced expenses in areas like commuting and work-related costs, while considering increased spending on healthcare and leisure. The Rule of 375 For a more tailored estimate, consider the 'Rule of 375' Multiply your desired monthly retirement income by 375 to determine the total pension pot needed. For example, if you aim for £3,000 per month: £3,000 × 375 = £1,125,000 This method incorporates a 4% annual withdrawal rate and accounts for taxes, providing a practical estimate for a 30-year retirement period. The 4% Rule A widely used guideline is the 4% Rule, which suggests you can withdraw 4% of your retirement portfolio annually without depleting your funds over a 30-year retirement. Eg: For a £1,000,000 pension pot, a 4% withdrawal equates to £40,000 per year. This rule helps in estimating the size of the pension pot required to support your desired annual income.

Are you confident you’ll have enough money after you stop working? As per a new pension survey conducted by Grant Thornton Bharat LLP, while 43% of the surveyed population aims to retire between the age of 45 and 55, 89% don’t believe they’ll ever see a ₹1 lakh monthly pension. Yet more than half still expect things to somehow work out. Young Indians, mostly between the age of 25-54, sit in this gap between ambition and action. And it’s a bit worrying. 75% of all respondents are saving just between 1-15% of their income for retirement. Unfortunately that’s more of wishful thinking than a plan. Part of the problem is that the way we grew up expecting life to work has changed. Earlier, joint families handled the cost of ageing parents, so responsibility was naturally shared. Most people either worked in government jobs with lifelong pension benefits or were part of a family business that supported the whole household. Private salaried jobs with no guaranteed security or pension are relatively new in comparison, which changes how financial responsibility shows up today. Now kids live on their own, often in another city or country. Medical inflation is at a consistent 14% a year, people live longer, and yet only 51% of Indians have a real retirement plan. We lean on the same three tools as if they can solve everything. Around 83% of people depend almost entirely on EPF, gratuity and NPS, with hardly any diversification. Most already sense the limits: 99% say gratuity alone falls short, only 32% feel satisfied with NPS returns, and almost half feel unhappy about EPF even though it sits on every payslip. So how do you move from underprepared to retirement-ready in a world where family may not be the backup plan? Here’s one way to think about it: 1. Start investing early, even with small amounts. Compounding and rewards time.Starting with ₹2,000 a month at 25 does more for you than starting with ₹20,000 at 45. 2. Match tools to your life stage. In your working years, NPS can pull double duty: it trims your tax bill and builds a long-term retirement pot. Once you turn 60, schemes like SCSS step in with more predictable, guaranteed returns. If you want more flexibility, an SWP lets you set up your own “salary” in retirement, with withdrawals that match your comfort level. EPF and gratuity play a useful role, yet they leave big gaps when you treat them as the entire plan. 3. Don’t let your health insurance lapse. Health inflation runs high, and one big hospital bill can undo decades of discipline. Insurance acts as a shield for your compounding, so your investments keep working instead of being cashed out in a crisis. Because at the end of the day, retirement planning centres on more than just being good with money. What structural shift would you make in your retirement approach if you truly believed you couldn’t rely on family support later? #Money #Retirement #Family