NRI: Tips for Retirement Planning

 

NRI: Tips for Retirement Planning

Are you NRI (Non-Resident Indian) and planning to live in India after your retirement? Well, than you will have to do retirement planning from today only no matter in which age group you are.

Many of my friends living outside India tell me that, What’s Hurry? I am in my Twenties/Thirties and there are still 20-30 years are remaining for the retirement than What’s the Hurry?

Well, let me tell you that, the earlier you will start investing for your retirement planning, the better. This is because it takes time to make compound interest work in favour of you to build a sufficient corpus.

How much will you need in India after Retirement?

This is the commonest question that NRI readers of this blog ask me. Well, this is because the actual value of any amount of money will be much lower after 20-30 years from now because of the inflation.

Say for example, if somebody can retire today with Rs.1 crore of corpus in tier-II city of India than 20 years from today he will require Rs. 4 Crore+ to retire if we consider inflation 7% per annum.

Thus, today’s 1 crores equals to Rs.4 crores after 20 years. Thus, you will have to predict and calculate in the future that with how much corpus you want to retire?

So I can tell you that how in the simple way, you can calculate your own retirement corpus? Well, just ask yourself a simple question. Ask yourself that, suppose if I want to retire today in so and so city of India and want to live certain kind of lifestyle than how much money I will need every months?

Suppose the answer comes Rs.1 Lakh. So you need Rs.12 lakh every year post-tax today every year if you want to retire today. Now, we assume that you can safely earn 10% per annum return from your capital. Now, in that case you will require Rs.1.2-1.5 Crores today to generate that much steady income every year.

Ok. This is today’s scenario. Now, you want to retire 20 years from today and inflation in India is 7% per annum in the long run. So how much money you will need to retire after 20 years if today you require 1.5 crores?

You will need Rs.5.80 crores after 20 years if you want to retire. So invest accordingly.

Investment tips for NRIs

My only single best tip is that, start investing as early as possible means now and invest much of your money in equities for the long time horizon (More than 10 years). You can invest in 3-4 mutual funds having a proven past record of good performance via SIP and build the sufficient retirement corpus and on your retirement, you can shift that money into fixed income instruments to generate steady monthly cashflow.