How to make retirement planning using the 30:30:30:10 rule? (2024)

Gautam Kalia, SVP and Head Super Investor at Sharekhan by BNP Paribas

The allocation of retirement corpus post retirement is as important as savings for retirement. The rule of 30:30:30:10 can be a good way to allocate retirement corpus. From the total retirement corpus, the first 30% is for the children as inheritance and the investor can invest this corpus in high risk investments like stocks or equity mutual funds.

The next 30% is for your own future to protect from inflation and as the risk appetite of the investor reduces, the investor should allocate this corpus in to the hybrid mutual fund schemes. The another 30% is for regular expenses and investor should invest this corpus in debt category schemes. The remaining 10% allocation should be invested for emergency fund in debt liquid funds or savings account.

Nitin Rao, Head of Products andProposition, Epsilon Money Mart

When we think about planning for retirement , we always feel visualize . No income phase, dependency on accumulated wealth. Common thoughts like how to accumulate , allocate and put it to good use. The 30-30-30-10 rule is an approach which help you to allocate your income towards retirement. The rule says first defined yours the total monthly income.

Next steps are to allocate 30% of your income towards housing expenses like rent , EMIs. Step 3 say to allocate 30% of your income towards necessary expenses like utilities, groceries, gas , internet etc. Step 4 – allocate 30% of your income towards your retirement planning. In last step – balance 10% should go towards your entertainment like movies, dining out etc.

This approach is beneficial for one who wants to take control of their spending and wants to prioritize their financial goals. It's important to note that the 30:30:30:10 rule is just a general guideline, and you should adjust your savings plan based on your individual circ*mstances and financial goals.

Kuldeep Parashar, CEO & Co-Founder at PensionBox

Retirement planning is a crucial aspect of one's financial life, and there are many rules and guidelines that experts recommend to follow. One of the popular ones is the 30:30:30:10 rule, where it suggests investing 30% of savings in stocks, 30% in bonds, 30% in real estate, and the remaining 10% in cash or cash equivalents. However, it's essential to understand that this rule is generic and may not be perfect for everyone.

A specific retirement plan should take into account individual financial situations, goals, risks, tolerance, and time horizon. The rule of thumb may not work for everyone as everyone's financial situation, goals, and risks are different. Therefore, we believe in dynamic retirement planning that iterates with real data insights and changes as life changes.

Dynamic retirement planning involves continuously monitoring and adjusting the plan based on the changes in the individual's financial situation and goals. It's essential to understand that retirement planning is not a one-time event but a continuous process that requires ongoing monitoring and adjustment. For example, if there is a sudden change in income, expenses, or market conditions, the retirement plan should be adjusted accordingly.

Retirement planning is an ongoing process that requires flexibility and adaptability. While general rules of thumb may provide a starting point, and as per PensionBox Insights, 76% Indians prefer personalised retirement, we recommend having data driven personalised plans that consider an individual's unique financial circ*mstances.

Mayank Bhatnagar, Chief Operating Officer, FinEdge

Over the years, a lot of thumb rules have come into play to help simplify the critical balance between spending for your lifestyle and saving for your future goals. The 30-30-30-10 rule is one of the more popular ones. In a nutshell – it stipulates spending the first 30% of your income on housing (EMI’s, rent, house maintenance etc), the next 30% on needs (grocery, utility bills and the like), saving the next 30% for your future goals and spending the remaining 10% on your “wants" – such as the latest iPhone model! Furthermore, some proponents of this rule say that you should save half of the 30% - that is 15%, for your retirement.

While these thumb rules are better than having no guideposts at all, we believe that they don’t do justice to an individual’s personal goals in today’s age of hyper-customization. For instance, 30% may well be too much – or too little – depending upon an individual’s life stage, income level and personal preferences. Take, for instance, the F.I.R.E (Financial Independence, Retire Early) method that is gaining popularity amongst a lot of millennials these days.

Proponents of this method are saving anything from 50% to 70% of their post-tax income for their retirement, in an effort to retire in their late 40’s or early 50’s! On the other hand, we have entrepreneurs who fully intent to work and earn well into their 60’s or even 70’s. For such people, even saving 5% of their income every month for their retirement may suffice. Some of them don’t want to save for their retirement at all, as they believe that their business incomes and rentals will be more than enough to fund their retirement.

A great financial plan is completely customized to an individual’s goals – not just in terms of goal amounts and target dates, but in terms of strategies too. For instance, a step-up plan combined with an annual lump sum deployment of your bonus may well be more suitable for your retirement goal than adhering to an oversimplified thumb rule. A combination of a human advisor + technology can help you visualize various scenarios and arrive at the best possible approach for you to save for your retirement while continuing to enjoy a good lifestyle.

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Published: 22 Mar 2023, 07:03 PM IST