Prakriti Nepal What is an ideal living for you? Supposedly! A peaceful hill or a sea-facing cute bungalow, a vehicle for traveling the road less traveled, a sheep farm in the outskirts, or just a wooden tiny house nestled in a natural environment,- where birds sing, butterflies flutter, bees buzz with a relaxing and calming wind flowing. The presence of your loved ones beside you or you just alone, every little thing,- giving you unmatched happiness of fulfillment- you, enjoying the lake that shimmer with the sunrays- a picturesque moment,- is the desire of every human.
How Can This Be Achieved?
By inculcating the historic wealth of ancestors? By working so hard from legal teen days? Or by Working Smart? Just by being mindful of what we are being thrown at by nature? Or by proper Investment, calculations, planning? Or is Saving and piling up can help you attain your checklist?
The main question is- have you done/or will you do- all of these things, with the intention of a happy and healthy retirement? If Yes is the answer- then until which age? How about retiring at the age of 40? The questions, FAQs about retirement, and the ideal age for retirement can go on and on. As much as how beautiful our imaginary retirement can look in our mind, it can give chills to those people, who find retirement planning intricate and complicated- where the independence of working with continuous passion is somehow sidelined because of retirement and in some cases- just stopped. Yes! retirement is tough for workaholics!
Hence, it is important to segregate between- the thoughts of retirement and implementing retirement plans always.
The Foundation Of Retirement Planning Lies In Two Aspects (Simply):
- Save as much as you want to save- considering time, place, situation
- Invest as much as you want to get the best possible returns from yours savings and income- considering people, person, power, chances, choices, and charm-ness along with time, place, situation
The reason why Investment is focused more here is that the sooner you start saving, the more chances you will get to invest and the faster the risks associated with retiring early or retiring at an appropriate age can be mitigated through learning.
In a fast-paced generation like that of today, people are quitting their 9-5 jobs to become independent Freelancers, Youtuber, Travel Vlogger, Writer, Tech geeks/Experts, Marketing Experts, AI Experts, Financial Consultants- the list can be quite long. Retirement though is fully an individual’s responsibility and is not taught in schools, neither the colleges give lessons on retirement planning. Hence, with generations’ change- retirement planning has also changed.
So, let us start planning for our pleasant and purposeful retirement. Let us find out together- if the size of our paycheque determines the quality of our life or is it that our career determines restful, cozy, sassy, adventurous retirement?
If You Have A Bank Account Or Just A Piggy Bank- Start Saving Now
WHO (World Health Organization) has mentioned that there has been an expansion in life expectancy as it has escalated by more than 6 years in between 2000 and 2019 – while it was 66.8 years in the year 2000 and in 2019- it is 73.4 years. In Nepal- the life expectancy has seen 0.4% soar from the year 2020. While keeping in mind the life expectancy’s increasing trend- it is of utmost importance to save for a longer future. So, to increase savings, an increase in investment is equally important- potentially, well enough for until and above 90 years of age.
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It requires a belligerent saving strategy. If we perform compound interest then the concept of literal saving can be known for lateral understanding as first step analysis.
The Compound Interest Assumption
One of the simple ways to calculate saving for retirement with proper investment is- the calculation of Compound Interest. For eg; if two people start saving the same amount of money every year; apparently- NPR 596,164 by both of them and obtain 6% interest annually; then, if both of them stop their savings by the retirement age of 67 then together they will gain double the money- if they have started saving when they were 22 years of age. If one of them started their saving cycle 10 years prior to the other one- then, he/she would save 59,616,400 more when the person reaches the retirement age.
Other than this- reflect!- do you have any other plans after your retirement? Do you wish to open your own retail store? Do you want to travel (within the country or abroad)?
Hence, Ponder Upon What Your Goal For Retirement Is Rather Than Just Having Retirement Saving Goals
Also Read: The Power Of Compounding In Investment
Simple Multiplication For Simple Saving Understanding
If you wish to get annual income that you shall crave during and after retirement- then you need to at least have perfect saving goals right at or before you turn 25 years. So, if you want to have a lot of wealth for more than 25 years after your retirement, simply calculate by considering- how much and from where you can get that desired money. But retiring at 40 isn’t a conventional age- hence, you would require retirement savings of nearly more than 60 years- if life expectancy is taken into consideration.
Have A Look At The Following Assumption/Calculation:
First– Give NPR 5,96,164 a year for 25 years
Second– Plan for 40 years instead of 25 years- which would give you NPR 95,38,624 as savings. The amount NPR 95,38,624 is just an assumption calculation and it can be different from person to person. This amount can be yours after retirement investment or just your retirement utilization amount.
Don’t worry about the alarming amount of money that you would see as retirement savings with this multiplication method- instead, now, cut down on it by keeping in mind your free-flowing amount which you can accumulate because of the side hustles that you have and any other ancestral assets/ money which you already possess.
So how much should you keep aside to gain a better- more satisfactory amount upon retirement for a purposeful retirement? Do look at the following list of costs that need to be contemplated:
Purposeful costs= Daily basic necessities costs- like food, fuel/vehicle to and fro cost, rent, clothes
Healthy Living costs= Yoga, meditation, or healthcare-related
Additional happiness costs= Going to a gym, Eating in a restaurant, Enjoying a movie
Freshness Costs= Traveling to a new place, Cruising Away to an island, or maybe becoming a space tourist
Safety and security Costs= Insurances, Guards, well-protected technology
Service Costs= Donation or charity and sometimes in Nepal- Parents keep a certain amount of wealth aside for their children and grandchildren too.
All these costs can keep becoming a burden if not managed properly. So, it will be wise- if such costs are separated as miscellaneous as per time and need.
Let Us Create A “Summary” As Per Nepalese Condition
Why as per Nepalese condition?- because- the value of money depreciates and appreciates country-wise.
In order to plan for retirement, here in Nepal – the first thing that needs to be done is to forecast the expenses that would be in the future time period. Let us say- if we expected the inflation rate to remain at around- 10% per annum as of today- then the cost that might incur in 20 years down the line needs to be calculated.
Please note that- here- the assumption is such that- a person is currently “30” years old and the approximate/ permanent age of retirement is the age of 60 years, which is the normal and average age of retirement in the context of Nepal.
Similarly, the average life expectancy of Nepalese people is 80 years (supposedly).
Though the oldest person in the world also hails from Nepal, 80 years is only considering the minimum average life expectancy.
Hence, the first thing that needs to be calculated is the expenses that would cost at the person’s time of retirement.
Suppose, Living expenses (excluding rent): 15,000/- [Current]
If we assume that the average living cost per head when a person retires will be – NPR 50,000- then- that individual would require NPR 600,000 per annum to accommodate single living. Here, if the assumption is made that both husband and wife (let us say- you and your spouse) is only dependent on your family- then- the annual cost for the accommodation of two people would be NPR 12,00,000 per annum.
So if supposition of the person and his spouse- living next (additional) 20 years is made from the retirement date- then- the cost required for only accommodation would be 12,00,000 multiplied by 20 years= 2,40,00,000 i.e, Two Crore and Forty Lakhs only.
Here, some miscellaneous costs have not been added- yet the accommodation cost reflects upon the necessity of the amount of wealth that will not be a saving amount- can be known. Expenses should always be anticipated- primarily -while planning for retirement because other costs as mentioned earlier such as health costs, travel costs, etc can be extremely high as per time and condition.
What Do We Understand From All These?
Setting a long-term goal is a must and having a secondary source of income will boost your retirement wealth!
Financially you need to strongly recognize your capability and have a proper qualitative backed quantitative calculation of how much you have in your kitty at the present moment and how much you would want to save for retirement at 40 years of age- if you truly want to retire at the age of 40.
Another Assumption/ Example:
Supposed current age: 25 years
Salary you are making per year: NPR 800,000 (If the assumption is such that- the person is earning since the first month i.e, January and his/her birthday is January as well.
Salary (Income) Per month: 8,00,000/12= NPR 66,666.67
If you save half your salary (income) every month- your saving per month would be: 66,666.67/2= NPR 33,333.33
So, if you are planning to retire at the age of 40= you would save the following amount:
25 Years Age (1st year i.e, year 1)= 33,333.33*12= NPR 3,99,999.96
40 years Age (15th year i.e, year 15)= 3,99,999.96*15= NPR 59,99,999.4
So, is nearly 60 Lakhs enough for you? In practical terms- 60 Lakhs for retirement in today’s world is not enough at all. So, you need to have a lot of savings every month to practically retire with a smile on your face at the age of 40 years.
Another Assumption In Context Of Nepal If A Person Want To Retire At The Age Of 40 years:
Current Age (suppose) = 25 years old
Retirement age= 40 years old
Difference in years (n)= 15 years
Total Amount required till retirement= Rs 8,00,00,000 i.e, 8 Crore
Current interest rate= 8% (Assumption)
Money Required To Save Every Month Is
FU Annuity= Pmt [(1+i)n -1/i]
Or, 80000000= Pmt*[(1+0.006)15*12-1/0.006]
Or, 80000000= Pmt*[1.93/0.006]
Or, 80000000= Pmt*321.66
Hence, Pmt= 80000000/321.66
= 248709.81_~ 248, 710 NPR
Hence, can you have 8 crores in your account by starting to save at 25 years, i.e, NPR 248, 710 every month?
In Nepal, you need to have a very free-flowing amount of wealth to retire at the age of 40. Also, you need to ponder if 8 Crore NPR is enough for you at the time of retirement?
As much as it may sound relaxing to retire at the age of 40 Years- it is very tricky and requires a lot of hard work and effort, a lot of support from family and it is necessary to perform situational factor analysis considering natural elements to retire at the age of 40.
What Can Help You To Gain Your Desired Saving?
Of course- investment!
You need to have the following things:
Employee Pension– If you are a self-employed person, then a pension is definitely the best bet for you. So as early as possible- try to get into Government jobs or jobs that provide you with hefty amounts of pension flowing every month.
Stocks/ Shares for selling and buying– You need to have the valuable shares that will make you rich within a certain time frame even if you desire to sell those shares after you retire.
Bonds can be your safety mate– Get hold of those bonds if you can- at the right time. There are different kinds of bonds- hence, look at which one suits you. Is it a fixed income security bond? Calculate and purchase wisely.
Other wealth management/investments that you can perform can be:
- Mutual Funds
- Life Insurance and other insurances
- Real Estate
- CryptoCurrency if legal
- Other trading techniques
- Build a company and sell
- Get or buy a house as early as possible
- Include Ancestral wealth in the calculation only if you are legally liable to get it in the case of Nepal- otherwise, skip and don’t include it in your retirement planning.
Having all these settled at the right time shall definitely help you manage your savings and investment and create a savings and investment cycle that best suits you to plan your retirement as early as 40 years or as late as 90 years. The choice is always yours.
From The Author:
Developing A Proper Investment Strategy For Financial Success
History Of Market Bubbles And Crashes: Lessons To Be Learned
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