‘Life is a race, agar tez nahi daudoge toh haar jaoge’, a dialogue by VIRUS from the movie, 3 Idiots, perfectly chronicles the rat race that an average individual runs for 35-40 years to achieve their financial goals.
And this entire struggle seems worthwhile because you know that at the end of this race is the coveted trophy of 'Happy Retirement'.
The very idea of a happy retirement, where you are not compelled to work for 10-12 hours a day or spend 3-4 hours daily travelling in an overcrowded local train seems liberating. You are finally at peace with yourself, free to pursue your hobby and travel the world. For most of you, retirement is the ultimate dream.
But what if I told you that only 21% of Indians were confident of achieving a successful retirement?
In a survey conducted by HSBC, titled, ’Shifting Sands’, some startling revelations were brought to light:
- 67% of individuals said that they would continue working throughout their retirement.
- 41% of individuals were planning to get a second job to supplement their retirement savings.
- 65% of the millennials are worried that they will run out of money in their retirement.
- 68% of the millennials are ready to cut their post-retirement expenses by 30-40%.
- 14% of the individuals have not even started saving for their retirement.
As disheartening as the above revelations are, the unfortunate truth is that we are grossly underprepared for retirement. Our nonchalant attitude towards retirement planning might be the final nail in the coffin of our happy retirement.
But before we understand the meaning and importance of retirement planning and recommend the best stocks for retirement, let us comprehend the idea of retirement in the Indian context.
Background: Retirement Planning – Need of the hour – The Indian context
In India, retirement planning has always taken a backseat to trivial financial goals such as international vacations, car purchase, home renovations and others. But the next couple of decades are going to bring about a drastic demographic shift which can rattle our very idea of a happy post-retirement.
The Demographic Shift
In a 2019 report by India’s Chief Economist, Mr. Krishnamurthy Subramanian titled, ‘India’s Demographic at 2040: Planning Public Good provision for the 21st Century’, it was highlighted that by 2041,
- The older dependent population (60 years & above) will rise by 16% from 100 million in 2011 to 240 million in 2041.
- The average life expectancy (life span) of an Indian male has increased from 60 years in 1994 to 69 years in 2019 and will further rise to 72.5 years by 2040.
- 81% of employment is informal in India. So, 81% of the working population has no provident fund or pension schemes and will be dependent on government assistance.
Some other critical factors
- The ROI on small savings schemes (such as POMIS, SCSS, NSC) has been reduced by up to 1.15%. A reduction in the post retirement ROI can drastically increase the required retirement corpus.
- While household inflation in India has grown at 6% - 7% rate, medical inflation has soared at 12% - 15%.
- A conservative 7% Inflation can reduce the value of Rs 1 crore today to only Rs 25.84 Lakhs in the next 20 years.
The above factors warrant the need for a retirement plan which can help you secure a happy and stress- free retirement.
What is Retirement Planning?
Retirement Planning is no rocket science. It is a simple exercise that helps you ascertain the corpus that you need at retirement to fund your post-retirement lifestyle and financial goals. The retirement planning process has two distinct stages:
Accumulation Stage: This is the most crucial stage, as, in this stage, you determine the corpus required for retirement and then devise a concrete strategy to accumulate the desired corpus. A small error in selecting the best investment option for retirement can do long-lasting damage to your retirement portfolio.
Distribution Stage: In the distribution stage, the accumulated corpus is distributed amongst various asset classes to maximize earnings from the corpus. The corpus must be invested across growth and guaranteed income investments.
While retirement planning might seem to be a daunting task, achieving a blissful retirement can be simplified using the ‘3-H’ approach.
The 3-H Approach to Retirement Planning
In the ‘3-H’ approach, you simply need to seek answers to the following 3 questions -
- How much retirement corpus is enough?
- How to accumulate the required retirement corpus?
- How to select the best investment option for retirement?
How much retirement corpus is enough?
George Foreman, brilliantly remarked, ‘the question isn’t at what age I want to retire, it’s at what income’.
A general thumb rule recommends creating a retirement corpus equal to 80% of your take-home income. So if your annual take-home income is Rs 10 lakhs and assuming you work for another 20 years, then (supposedly) you need a retirement corpus of Rs 1.60 Crores to retire peacefully.
While a decent starting step, this thumb rule is redundant since it does not account for the rising inflation rate or life expectancy. For a goal as important as retirement, ball-park figures aren’t good enough. You need to figure out the exact retirement corpus to lead a comfortable retirement life.
How to achieve the desired retirement corpus?
The most challenging part of the entire retirement process is strategizing how to accumulate the corpus. While you have hundreds of 'so-called-best' investment options available, selecting the best one is no easy feat.
But before evaluating the best investment options for retirement, riddle me this, if you were to go on a long road trip (let's say to Ladakh), would you prefer to drive a Bullet Enfield or Scooty pep?
Your obvious choice would be Bullet Enfield. Your rationale being that it offers superior stability, has best mileage and can manoeuvre uncertain terrains.
Your retirement planning journey too is filled with potholes and uncertain terrains and hence you need an investment option with a history of generating superior returns.
Investment options such as PPF, EPF, Bank Fds, traditional Insurance policies have historically generated returns in the 6%-8% range, and with an inflation of 6%-7%, your real returns are limited to the 0% - 1% only.
Stocks on the other hand, have historically proven to be the best investment option for retirement. Stocks like, ‘Colgate – Palmolive (India) Limited’ is one of the best stocks for retirement as it has generated an absolute return of 19.03% in the last 17 years!
Remember, when it comes to selecting the best investment option for retirement, stocks are your Bullet Enfield - reliable, robust and apt for a long duration.
How to select the best stocks for retirement?
Like a kid at the candy store, the stock market offers you 5000+stocks to choose from. From large cap-stocks to small-cap stocks, every stock seems lucrative. The stock market gurus (in newspapers and news channels) recommend buying something, while the internet recommends selling the same stock!
As a layman, you are utterly confused as to whom to trust? Everyone has their self-interest, and the internet cannot be held accountable!
So, how do you make the most important decision of your life – Which stocks to buy for a successful retirement?
You have two options - either conduct personal research of the 5000+stocks listed in the market or find a partner who works for your interest.
Like Amit Shah is to Narendra Modi, likewise, StockBasket is your trusted long term companion, friend, philosopher and well-wisher while selecting the best stocks for your retirement.
StockBasket is India’s first ‘long-term buy and hold’ investing platform which facilitates investment in multiple stocks in the form of baskets. A StockBasket contains a pool of 5 - 15 stocks. StockBasket expertly curates basket of stocks in an the ideal proportion so that the overall risk of the basket is reasonably diversified.
StockBasket is an expert-curated readymade basket of stocks based on 25 intelligent parameters, designed to suit your long term wealth creation needs. Our proprietary engine evaluates over two crore data points daily to determine the quality of stocks in each basket.
StockBasket has helped investors manoeuvre the complex world of equity investing, with its uniquely expert-curated 'Retirement Basket' containing the best growth stocks for retirement.
The ‘Retirement Basket’ has stellar stocks spread across market segments like FMCG, Pharma, IT sector and others, which ensures optimum diversification.
The Retirement Basket also contains pharmaceutical giant, ‘Procter & Gamble Health Ltd’, which has generated an absolute return of 15% in the last 17 years.
‘Colgate – Palmolive (India) Limited’, one of the best stocks for generating retirement income has registered a growth of 19.03% in the last 17 years, is also a part of the Retirement Basket.
Stocks like 'Colgate – Palmolive (India) Limited' & ‘Procter & Gamble Health Ltd’ have the potential to propel your retirement corpus to glory. But identifying such stocks takes years of analysis and hardwork.
Luckily for you, StockBasket, with its ability to evaluate over two crore data points daily across 25 intelligent parameters, is the best in business.
StockBasket’s Retirement Basket includes many such blockbuster stocks, which have infinite growth potential and can help you win the rat race and the coveted trophy of a ‘Happy Retirement’.
How to start the journey towards a ‘Happy Retirement’?
The investment in ‘Retirement Basket’ starts from Rs 35,000, and it takes only 5 minutes to open a free Samco trading account and start investing. To sweeten the deal, you also get a '5-year fee refund guarantee'.
A blissful retirement need not be a dream any more. With StockBasket, we are committed to turning your retirement worries into retirement bliss.
Sign up for StockBasket and kick start your journey towards a ‘Happy Retirement’.