It is essential first to understand the meaning of retirement corpus, and then we’ll understand the four things that can create a dent in it. The term retirement corpus may sound like it is very complicated, but the meaning is straightforward.
If put in simple language, retirement corpus means the total amount of money that you require after your retirement for the living expenses. The money provides for your family until the time you and your spouse will live after retirement.
Now let’s talk about the four things that can put a dent on your retirement corpus:
Health insurance:
We cannot deny that the hospital costs have been rising nowadays and everything is becoming expensive. The medical expenses are rising, and so is the amount of money one needs to invest in it.
People think it’s better not to take another health insurance as they already have one which is under their employer’s medical insurance. People think why should they spend extra money on separate health insurance if they are already covered for it as an employer.
What is essential to understand is that this health insurance helps for their safety in the future when they need it for their medical expenses.
Returns over inflation:
If there are no returns over inflation, then the rate of returns and inflation stays the same. In such cases, the retirement corpus required is around one crore for the betterment in the future.
If the amount is lesser than the corpus tends to get lesser and gets spent completely.
Taxes:
Taxes are the grey area of this whole discussion. If you consider 6 lakh as the income, then you won’t have to pay any taxes on these 6 lakhs, but would it be the same after 25 years? If the income is 25.8 lakhs, then would there be no deduction of taxes on it? Highly doubtful.
There is no surety of how much tax deduction will be made on that amount, but the taxes will surely make a dent on your retirement corpus in total. One reason why asset allocation is so necessary and investments like PPF can help you in withdrawing money without paying any tax.
Of Course, there is no surety that you wouldn’t have to pay any tax on PPF, but there are chances that it can happen. It is essential to invest in the instruments which can help you in making your income tax-free.
Life expectancy:
It is another reason which can put a dent on the retirement corpus. If someone’s spouse survives more than 85 years, then how will the retirement corpus be helpful?
It won’t be helpful because if you exceed the expectancy, that can be a big dent in the retirement corpus.
Though there is a solution for this, while investing an amount in the retirement corpus also invests some amount in the emergency corpus,
it will help you in such cases. Investments will always benefit you in amazing ways.
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