Greeting To Our Readers! 

Retirement, a phase that every individual will enter one day, might be some people near to their retirement few are years away. Some of them might also be saving for their retirement.

Well, being a financial advisor what question I hear from most of the retirees is what kind of lifestyle they can afford after they retire? What luxurious things like cars and others can they afford?

Let us see about the possible explanation for kind of these queries!

Consider Your Retirement Lifestyle….

Usually, one can live retirement with 80% of the income earned at the time of retirement. Why is that so, will know after reading the explanation below, but one thing you must know is that what you can afford after you retire prominently depends on what kind of lifestyle you choose and how much corpus you have accumulated for your retirement?

Now, once you retire, you’ll be able to eliminate certain expenses. For instance, you would no longer have to save for retirement and also spend less on commuting related to work.

After retirement, heading to your hometown, where expenses are lower, could mean you could do with 70-80% of pre-retirement income. However, if you are planning a lavish retirement lifestyle, then you need to earn at least 90-100% of it.

Inflation Plays Major Role During Your Retirement……

Annual consumer inflation is inching up by 6-7% every year, while education and medical expenses are moving up at 10% rates annually. If your annual household expenses are Rs 6 lakh now, it could be Rs 12 lakh over a decade. So, do the math and build a retirement corpus accordingly.

The general thumb rule is to have at least 25 times the annual household expense at the time of retirement as your retirement kitty. It will ensure your portfolio lasts for about 25-30 years after retirement.  

If you are falling short, then you might have to adjust your lifestyle or find alternative income sources, which surely means you would have to work even after you retire.

Exposure To Equity In A Retirement Portfolio…….

Retirement affordability is also affected by the extent of equities in your retirement portfolio. After retirement, if you plan to go 100% into debt, then this will grow steadily but only at 5-6% annual rates.

Having equity will potentially let the portfolio grow by 10-11% annually. It is considered smart to have around 50% of the post-retirement portfolio in equity.

Prepare A Backup Plan For Unexpected……

One of the major fears for retirees is that of unexpected medical expenses and other big unplanned expenses. Having a separate emergency fund for this helps and so does having comprehensive health insurance.

Keeping up with the Trend That May Costs Big……

Remember that the lifestyle of Indians is going to improve in the future with improvement in income levels. A decade back, a smartphone might not have been a necessity, but now it is. Essential innovations like these cost money and you need to build a bigger corpus for that.

Let Us Sum Up!

As said earlier your affordability depends a lot on the retirement lifestyle chosen and the accumulated corpus. And you must not be surprised to know that both these factors can be controlled by you.

You can reduce expenses after retirement by choosing a normal lifestyle instead of a lavish one. However, it's completely your choice.

Secondly, well-calibrated equity exposure in your post-retirement portfolio is the best way to create a corpus that will build up your affordability factor, it can even help you buy a car or other luxurious items even after you retire!

You can contact your fund manager or can visit Ashutosh Securities Pvt. Ltd. for any further assistance in mutual fund investment. Keep reading our article and stay updated with the latest news about Mutual Funds!

For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).