Tag Archives: India

(Early) Retirement Planning in India – A Practical Approach

28 Feb

Today is my last working day in my fulltime Software career. Yes, I decided to retire at my current age early retirement is nothing bad!of 43 years after careful deliberation and planning for retirement over the last few years. I worked for exactly 19 years in the IT Industry which thought is equivalent to some 30 years of efforts in the Indian context; that is, when you consider the first ten years of hard work and extra hours that we all had to put in during those years.

Nevertheless, I decided to call it quits mainly due to the following reasons:

  • I was kind of getting bored with the IT office routine – while Software still excites me, the industry quite doesn’t anymore
  • I thought I have planned my finances reasonably well till today after initial years of spend-thrift lifestyle. At the moment though, I have no loans, have some decent savings and fixed assets, and I have further plans to appreciate whatever little wealth I have)
  • I do not want to improve my lifestyle or living standards further or better than what it is now. In fact, I already froze my lifestyle some five years ago
  • I plan to leverage on my secondary skills and hobbies in order to earn some income from home. This, at the moment, cannot immediately match the high salaries that IT professionals command – it is more about doing what you like the most and have huge potential to outsmart the IT salaries
  • I see the need to spend more time with my family with my kids (a special one too) growing up – I believe that after certain age, one’s sole goal should be grooming the next generation and giving back all your learning to the society

The reasons may be reasonable but can one really retire so early without having some planning and backup? Well, that’s what we are going to discuss in this post. I am writing this post because I thought it might help a younger guy out there who wants to plan for his retirement. It is very obvious that one needs quite some money to retire and hence it needs careful planning! I shall also share here the little Excel sheet that I made sometime back to help with my retirement planning.

How to plan for your early retirement?

Disclaimer first: I am not a financial adviser nor planner myself. However, based on the personal finance articles that I got to read in newspapers and online over the past several years, I kind of figured out how much money I might need to retire early and more importantly, if that money is not sufficient, how can I supplement it further? (In fact, that’s more like my situation now). In my case, the plan was laid out almost 8 years ago and I kind of executed it more or less along the expected lines. I must however admit that I didn’t fully reach my financial goals yet, and hence it is all the more important to discuss the management of post-retirement savings as well. We will discuss both these aspects in the post.

If you ask me about retirement planning, the following will be the logical steps involved.

  1. Decide at what age you want to retire from your full-time job; Do that at least 10-12 years in advance so that you don’t miss any wealth creation opportunities.
  2. Project your typical monthly expenses post retirement (without considering inflation parameters; planning tools will take care of adjusting for inflation) and hence the amount you want to retire with for a longevity of say 80 years
  3. Execute your plans to save up that much money – The plan should include foreclosing any pending loans before retirement, a clear strategy for pre and post retirement investment, onetime big expenses etc. Also, do special planning for high-inflationary expenses such as medical (You need a good medical insurance for your family post retirement) and a term-life insurance well in advance
  4. If the return on retiral investment do not seem sufficient, plan for a backup part-time job or go for alternate investment instruments (often high-risk, high-reward ones if you are retiring at a younger age)
  5. Retire peacefully and enjoy those little things in life!

Now, that sounds easier said than actually done but it’s not that easy! Let’s now take a closer look at our planned steps. I shall try to explain these steps in detail using the little Excel sheet that I was talking about (download link below).

[ Download my Retirement Calculator Here ]

Step 1. At what age do you want to retire?

To begin with, you need to make up your mind to arrive at a reasonable retirement age. This has to be done very well in advance. For example, when you are still in your early thirties, you may plan for a retirement at 45 if you are sure of saving up enough. Be careful not to be super-confident here. In my case, I started thinking about retirement about 7-8 years back itself after seeing a few ups and downs in the industry as well as the financial markets. More often than not, people won’t take a retirement call out of fear or social reasons – because it may be seen as a sin by old thinkers!

Your readiness for retirement again can be checked using my sheet. If you are not ready yet, use the sheet again to decide how can you accelerate your investments towards achieving your retiral goals (i.e. the money with which you can retire. Remember to add additional investments for special needs such as kids education or marriage, if such events are likely to happen post your retirement. You may use the third sheet in the workbook for such goals and add up to your systematic investment goals)

Step 2. Project your monthly expenses

This is reasonably easy if you have the habit of tracking your monthly expenses. If not, do the following:

– From all your bank statements, find out your annual account outflow (withdrawals, bills payments,credit card payments)

– Deduct the expense types that won’t happen post retirement (e.g. kids schooling expenses – not always though, fuel adjustments when you don’t commute that often, shopping budget as applicable etc)

– Add any additional expense that might recur after retirement (e.g. medical insurance)

– If there are things that repeat every couple or few years, add those expenses on an annualized basis as well (e.g. family vacation abroad once in two years)

– The resultant value divided by 12 would be roughly your monthly expenditure.

– If you want, more accurate values (advisable) please track your expenses from today itself.

Now, this monthly expenses should be on as-is basis. i.e. if you decide to retire today, how much you will need after cutting anything that’s not applicable in retirement life is this monthly figure we are talking about. Don’t worry about any inflation parameters at this moment.

Step 3. Execute your plan based on your particular sheet

Now, it’s time to take a closer look at your sheet. After entering the mandatory fields of your current age, retirement age and expected monthly expenses, you may adjust the inflation parameter and the expected returns on your savings after retirement. The inflation parameter in Indian conditions can be anywhere between 6 to 10 percent over a long period of time. The rate of returns on your investment can be as low as 3% for savings banks, 7 to 10 percent in long term deposits and 8 to 12 percent typically in equities (and as high as 15-20 percent in certain time horizons in the bull market).

I suggest to leave the longevity at 80 years as that’s typical life expectancy number that one should plan for. The life expectancy in India is slowly going up thanks to advancement in medical facilities and health standards.

With that plan in the sheet, you now know how much you need to save up. You need to document that somewhere and not keep it transient in the sheet (and you forget your planned numbers later).

Now, the preparation steps start. Some of the activities you need to undertake during this 8, 10 or 15 year period is to close all your loans, take care of major one-time expenses or allocate further money for that, and take a term insurance policy at a good age (typically before 40 years and preferably in early 30s).


(Note: As a thumb rule, one should de-link insurance and investments. There’s no point in having an old style endowment policy like the one LIC used to offer. Instead, earmark most of that money into high-return investments and use only a fraction of the cost for a high value term deposit. These days, taking a 50L or 1 Crore term insurance policy is not a big deal!)

Living frugally and investing wisely should be the motto towards the retirement age. Especially, one should go for things that add long term value than disposable/expensive items (e.g. smartphones, electronics, changing cars frequently etc).

No matter what, your end-goal on retirement day should be having that magic figure that you want to retire with.

Some of the wise things to do on retirement is to dispose illiquid assets such as real estate, gold* etc. Also, try to invest 20-25% of your take home salary in equity market (blue chip) and mutual funds prior to your retirement. One good thing to do is to allocate 10 to 15% of your take home salary towards EPF (Pension Fund or Provident Fund) on top of the employee+employer contribution. This comes as a big savior at the end because it’s all tax-free amount that returns at an average of 8.5% over the past several years. It’s as good as getting 12% annualized returns before tax. I was doing exactly the same since 2004-05 and it really helped me!

* By the way, responsible citizens should avoid gold as an investment instrument as this illiquid and stagnant wealth – while giving you good returns – will spoil the country’s economy. Our biggest curse is the trade deficit caused by Petroleum and Gold imports.

Step 4: Special risk planning

Now, what if you slogged it out till your retirement day and you still are not going to make the money you wanted as per the planning sheet? (Don’t worry, that will be the case with most people)

You have to either (1) Go with some high-risk, high-reward schemes or (2) Plan for a part time activity that earns some money to supplement your retirement savings returns with which you can make a living.

(1) is where I disagree with the old school of thought. Yes, it’s ideal to invest all your post retiral savings into risk-free and fixed return instruments AS LONG AS you retired with a handsome amount in your bank. And that’s indeed the recommendation for those who retired rich. What if you didn’t and you are still rather young?

In such cases, you need to maximize your returns from your post retirement money by investing part of it into the equity market. Why? Because it returns like 10% or 12% annually on your retirement savings and you are going to beat the inflation big time.

Also, please note that the risk scenario mentioned here is applicable ONLY when you couldn’t take that risk before retirement. It is always better to take this kind of risky investment before retiring itself, as much as possible.

Negating the bad effects of Inflation is the key to be successful in Indian conditions!

You may compare the two sample screenshots below to understand what I am talking about.

retirement plan - 1

Retirement Plan 1 : Minimal returns on Post-Retirement Savings means You have to save up a LOT!

retirement plan 2

Retirement Plan 2 : Better Returns post retirement means, you need to Save up less


If that’s not your preferred route, you need to definitely do some kind of part time activity that earns money (in my case, that’s the plan!)

Step 5: Happily Retire!

No explanation needed here, but all that you have to do is to go for a good medical insurance coverage, bifurcate your money into the right investment instruments and enjoy life! Because you have done your planning part really well, you deserve to enjoy life to the fullest till the very end!

Early Retirement Hassles (Non-financial)

When somebody decides to retire so early in their life, the biggest worry is to manage and convince the family members. In the Indian context, you will invariably have an argument with your spouse on your decision. Even worse will be the nosy friends and the family people who will be waiting for an opportunity to prove you wrong for not thinking like the most! At any point of time when things don’t seem to go well, you have to remind yourself that your conviction is better than the conventions you see around!

Further, some people might develop boredom and depression after an early retirement decision. That’s why it is very important to find a post retirement activity to keep you occupied and happy. Retirement life is a very good time to reconnect with your family, friends and rediscover yourself. You will also find a lot of time to take care of your health.

The above are some of the non-financial aspects that you need to manage and figure out to lead a peaceful life, after having done the financial part perfectly right!

Enjoy your life!

PS: This article was written in a hurry as I really wanted to post it on my retirement day itself! Any suggestion, corrections are welcome and let me know if the Retirement planning Excel sheet that I shared has any bugs or calculation issues!

Telegram Service to Stop in India: Some Childhood Memories

13 Jun

Telegram will soon be history in India! In fact, practically it was already dead with the likes of telephones, fax machines, mobile phones and e-mail services gradually taking over its place across the past three decades or so. As a matter of fact, I was really surprised when I read the news today that the public sector giant, BSNL (Bharat Sanchar Nigam Ltd), still operates this service though only about 5000 telegrams are being sent every day – down from million in the past. To be frank, I had really forgotten about the existence of Telegram and hence when they announced the decision to discontinue the Telegram service in India by July 15th, 2013, I was like ‘Who cares?’. But then, I started to recall a few good old memories from my childhood days where the Telegram service played a significant role in our lives – though not on a daily basis. It was indeed, ‘the fastest and affordable one-way messaging service’ at some point of time in the history after making its debut in the British in the middle of the 19th century.

Telegram in our lives!

Having brought up in a village background, I definitely have a couple of childhood memories to share about telegrams. I am talking about late-seventies to early eighties when I studied in our government primary school which was very near to the village’s own post office. This post office (Dak aur Tar Ghar which later became Dak Ghar alone) was a very old building that leaked during the monsoon rains and it hosted two staff members – A postman and a post master. My first memories about the telegraph equipment are from this Post office where our post master was always busy punching into it. And this mystery equipment produced random ‘tic-tac’ sound that was kind of nice to listen to. The only other sound from that building was his colleague slamming the heavy brass seal on all those letters to be delivered during the day. I clearly remember that both of them chewed Paan throughout the day. The postman’s face is still in my memories though I am unable to recall the face of the post master – the superman – who handled the telegraph.

Most of us – the school going lot – would invariably stop by the post office just to watch and listen to the proceedings inside by standing near a rusted window that doubled as the stamp & envelope vending counter.

Telegram = Either GOOD or mostly BAD news

During that ‘ancient era of telecommunication’, the normal mode of messaging was writing a letter that would take several days to reach the recipient. The senders can procure a ‘kavar’ (Stamped envelope) or an ‘illant’ (Inland Letter Card) from the post office to write and send their letter or snail mails as they are called today. These mails usually included kilometers of writing that oozed affection and everything that had to be conveyed between two loved ones or families since their last communication.

A telegram on the other hand had the purpose of ‘quickly’ communicating a few words across to your people who are staying away in another place – in a different district or state. Unfortunately, this mechanism was used mainly to inform about the events of death (which was probably the only urgent matter then?) in the family and hence the arrival of a telegram was always looked at as a dreaded thing – invariably someone at home would faint as soon as a telegram arrived – even before its content is read out. This aspect of the telegram has been depicted in comedy scenes of many Indian movies and if I remember correctly these important telegrams were sometimes delivered even after regular office hours.

Telegrams always conveyed concise and direct message when used for happy purposes such as wishing people on their achievements, marriage, wedding anniversary etc or even to communicate job offers by companies where there wasn’t much time left to report. However, when used for conveying the death of a loved one, it always contained diplomatic words such as ‘serious’ or ‘unwell’. So if someone gets a telegram that read ‘Grandfather serious, Start immediately’, it usually means that grandfather has already expired. And the neighbors of the deceased could always predict the arrival of someone who received the telegram when a spike of scream originates from the particular house – this can sporadically happen a few days after the death as and when the telegram recipients arrive one by one.

My experience with Telegrams

During my middle to high school days, I used to go to the post office to send ‘grams’ on my father’s behalf. Most of the time, the purpose was to congratulate or wish some of the newlyweds in his circle – typically his past colleagues from his transferable job postings. It was an easy task for me as he would have mentioned the greeting code to pick from the published list, fill it in a small form along with recipient’s address. Sending a digit code that finally translated to a one-sentence message was something that amazed me then. And, my father always used to pick his favorite greeting code that translated to ‘May Heaven’s Choicest Blessings be showered on the young couple’. As a matter of fact, his diary (and most printed diaries then) had these telegram codes printed, on their annexure pages, which was later replaced by STD codes of cities. And I do not even know what occupies that place now!

As I grew, I understood that it was Morse code that does the trick of transmitting these coded messages. When I was in 9th or 10th, a couple of us together built our first telegraph equipment prototype for a science exhibition – Telegraph really played its part in the life of millions of Indians from our generation and a couple of generations before ours as well.

And today, just like many other things from the past, the telegraph is going to be part of history books alone.

RIP Telegraph!

How Indian Highways are Numbered (New NH Numbering System)?

12 Feb

(Just in case you are not aware of) the Ministry of Road Transport & Highways had taken the initiative of re-numbering most of the highways in India a couple of years ago. It was a minor news item in most dailies then but I thought it’s a huge step towards rationalizing our road network names along with rebuilding the infrastructure. The National road grid in India has been getting a good boost ever since our former Prime Minister Shri. Atal Behari Vajpayee’s National highway development project (NHD) started materializing in stages.

Highway System in India

India at present (Feb 2013) has more than 200 national highways totaling to a length of 70,000+ kilometers which is maintained by the NHAI (National Highway Authority of India)

The primary highway grid, as per Vajpayee’s dream project, consists of the following major stretches (picture below) supported by existing highways significantly enhanced:

The North-South Corridor stretches from Srinagar in J&K state to Kanyakumari – the southernmost tip of India. The length of this major road is 4000kms.

The East-West Corridor connects Porbandar in Gujarat with Silchar in Assam and the total length of this road being 3300kms. (Wonder why they didn’t plan it till the boarder including Arunachal Pradesh!)

The Golden Quadrilateral (GQ) is the highway network connecting the four metros in India – i.e. Delhi, Mumbai, Chennai and Kolkata. The spin-offs of GQ also connects cities like Bangalore, Pune and Ahmedabad. The total length of GQ is 5846kms.

Most part of the above highways is 4-lanes while 6-laning project is being undertaken in many stretches.

Please note that the North-South and East-West corridors are often referred as ONE i.e. NS-EW corridor

north-south east west corridors
North-South and East-West Corridors

golden quadrilateral India
The Golden Quadrilateral

(Image courtesy: Wikipedia – The boundaries shown here may not be the actual boundaries of India)

Highway Types in India

If you refer to Google map for driving, you must have noticed symbols like AH, NH and SH. The following are the explanations for these respective codes.

1. National Highways (NH): These are major highways in India that provide connectivity to all cities and states. NHs are maintained by the Government of India (i.e. NHAI). As I mentioned earlier, National highways spans over 70,000 kms and even the NS-EW corridor and GQ are formed by many such highways.

2. State Highways (SH): State highways spans over 150,000kms in length and are managed by the state governments to provide accessibility and city/town inter-connectivity within each state.

3. Great Asian Highways (AH): Asian Highways are part of the cooperative project within Asian countries. While in principle, the National Highways in India themselves forms the AH stretch in India, it’s good to understand them from the map’s point of view. You will encounter many places in a map where the highway is referred to as an Asian Highway or AH. In reality though, there’s no separate road network for AHs but they consume the respective major highways in the participating countries to form the Asian Highway grid. You can read more about Asian Highways at Wikipedia.

How Indian Highways are Numbered?

Let us come to our main topic now. Until recently, the Indian highways were numbered in a very confusing manner that didn’t provide any logic behind their numbers. However, the Government of India took a major decision in 2010 to rationalize the highway numbers in a way that the number provides some clue about the geographic location and the direction of a particular highway.

Please refer to this circular by DORTH to know all the renumbering that took place.

The logic behind numbering is as follows:

  1. All North-South highways will carry EVEN number
  2. All East-West highways will have ODD numbers
  3. All major Highways will be single digit or double digit in number (Read the exception in point F)
  4. North-South highways will increase their numbers from East to West. For example, a particular North-South highway in Central India or Western India will have a higher number than the one in East India. To be specific, now you can guess that NH4 is somewhere in East India where as highway 44 may be towards the west of India while both runs north-south due to the even numbering
  5. Similarly East-West highways will increase their numbers as we move from North to South. By this logic NH1 will be running East-West somewhere in North India while NH 83 may be somewhere down south. Of course, there may be a minor confusion among some roads that may be running diagonally in stretches
  6. THREE digit numbered highways are secondary routes or branches of a main highway. For example, 144, 244, 344 etc will be the branches of the main National highway 44. Please note that since NH44 (NS Corridor) runs the length of the country from North to South a side shoot say 144 may be up north while something like 944 may be down south
  7. Suffixes A, B, C, D etc are added to the three digit sub highways to indicate very small spin-offs or stretches of sub-highways. For example, 966A, 527B etc

So next time when you are driving based on the map or navigation device and when you see/hear something like ‘Turn left to Old NH47’ you should remember that the particular highway is being re-numbered.

I am not sure when the numbering process will be complete but I sincerely hope that they introduce a lot of sign boards to avert any confusion. Also, like in the US and some western countries, it may help if they provide some clue about which direction one is heading at any given moment. For example, 35W means a west bound highway. In India, since the major number (e.g. 35) corresponds to the direction itself, what the road signs or milestones should carry is something like 35-W or 35-E, I think.

Picture References

Wikipedia has a nice picture showing all the re-numbered highways. Please refer to this image link.

For a magnified view of the National highway map in India, please refer to this link.

‘Highways for Life’ is indeed the punch line for India as well.

What Indian Politicians Said About Obama’s Win?

7 Nov

So what were the Indian politicians’ reactions after Obama’s won the Presidential elections for second time?

(Please note that these are fake remarks intended for humour alone and hence readers are requested not to get offended by the same)

Indian politicians about Obama

Digvijay Singh

I have solid evidence that Obama took huge sum of money from anti-social elements in order to drive his election campaigns not only this year but in 2008 as well. And the US presidents should not involve their families in political matters and election campaigns (they should instead create political heirs like Indian political parties do)

P Chidambaram

Statistically speaking, although Obama won, there might have been a percentage of technical error that affected the final outcome for Mitt Romney. We intend to fix this over the next 40 years, via stringent measures and policy creations without which the GDP growth of 0.0001 percent cannot be achieved nor can inflation be brought down under 20%.

Mamata Banerjee

Obomo treat Bongol like step sohn. This is not occeptoble and all his peepal are CPI(M) cadres, Maoist cadres…. The real ‘Poriborthan’ is what we need just like we are doing in Bongol.

Arun Jaitley

The voters are entrusted the Obama yet again just like the aam admi did it for UPA in 2009. I am sure they will regret the mandate given by them sooner or later. I believe that the Republicans will form a very supportive opposition (just like we are doing) to take the country to the next level. At BJP, we believe that they have a bigger role to play (to make sure that the house is disrupted in every single session) in this context.

Sitaram Yechury

We will not let Obama take up any development activities in the US – especially anything that affects the common man. Our Polit bureau is closely watching the developments and we intend to come up with our white paper soon. As for Mitt Romney, he’s no saint either. We hope to see a Chinese immigrant or genuine Socialist Russian leader leading the United States soon. (As for us, we will not let anyone rule, we don’t want to rule either, we are just genuine activists concerned about all types of development activities)

Bal Thackeray

Obama won just because of the immigrants who are causing trouble all over the nation. If the US president dares to visit in India again, I warn that Shiv Sainiks will spoil all cricket pitches in India.

Devegowda

Mitt Romney lost because he did nothing for the farmers. Only those who support farmers will be supported by our party (so that we can acquire as many farm lands and farm houses as possible). I hope to see Obama taking up more farmer friendly policies (such as making Ragi Muddhe available in the White House Canteen)

Nitish Bharadwaj

We will fight till Obama gives special economic status to Bihar. However, I will not accept the economic package if Modi is teaming up with Obama.

Narendra Modi

Have you seen his Billion Dollar bailout girl friend err… wife? She did the trick for him. (Obama: If you don’t like billion dollar girlfriend, why don’t you tell us more about your simple school teacher village wife)

Yeddyurappa

This is all black magic. Obama did black magic with the help of two famous Californian and Iowan black magicians. On top of this, he also visited 100 Hindu temples in 10 days and got the job done by bribing gods. I had advised Romney to visit at least 200 temples but he didn’t listen to me, fearing me to snatch power. See what happened now?

Kejriwal

Obama must RESIGN first and face election again. Mitt Romney is no saint either and he should RESIGN as well. And if there are any other contender out there, he is corrupt and they should all resign. Resign! Resign!! Resign!!!

…and…

Manmohan Singh

Mmm… Grin… Sigh… (Gets up, looks at the match referee Soniaji for approval and hesitantly waves at Obama like a Cricket umpire feebly signaling a boundary hit by ‘The Sachin’)

10 MultiBagger Mid Cap – Small Cap Stock Ideas

4 Oct

If you are into Indian stock markets, here are some stock recommendations for you. I personally hold most of these stocks and hence your risk is mine as well. I am not providing detailed analysis of these companies but that’s out there for you to explore on websites such as Moneycontrol.com

Indian Stock Recommendations

Please note that, I am not talking about ‘trading’ here but long term investment here. Long term for me is at least a 1 year term.

Here is my list with their recommended entry prices in the bracket (In some cases it is my own entry price for these scrips).


1. Shriram City Union Finance (765)

2. Kitex Garments (58)

3. SpiceJet (38)

4. DQ Entertainment (18.50)

5. Escorts (64)

6. Acrysil India (80) – After Bonus adjustment

7. Kwality Dairy (31)

8. Manappuram General Finance (35)

9. NIIT (33)

10. APM Industries (13)

I shall keep updating on what am I doing with these ‘multi-baggers’ in the next months. Currently the target for each of these stocks would vary from 75% to 300% within a 12 to 24 months investment window.

Disclosure: I hold some of these stocks and I may have vested interest in these companies. Please do your own research before investing.

(I was staying away from the stock markets for a couple of years now but made a re-entry seeing some good opportunity in the recent bull run)

Update on January 02, 2014

It has been about 15 months since I recommended the above stocks. I still hold some of them while I have recently sold most of these stocks in the current fluctuating markets. I wouldn’t be tracking most of the stocks again but would like to provide the following update on how they fared.

Stock name (Recommended price, High since)

Shriram City Union Finance (765, 1230) – Still going strong

Kitex Garments (58, 83.85) – Still going strong

SpiceJet (38, 48.30) – Bound to various government regulations and recommend to enter only at very cheap levels

DQ Entertainment (18.50, 47.95) – Still going strong

Escorts (64, 145.15) – Still going strong

Acrysil India (80, 240) – Still going strong

Kwality Dairy (31, 38.70) – Hold

Manappuram General Finance (35, 46) – No more attractive due to gold woes

NIIT (33, 33) – So so

APM Industries (13, 28.85) – Still going strong

Those stocks that are marked as ‘Still going strong’ are good for holding for long term, in my opinion

Happy Investing!