IDFC FIRST Bank presents Outlook Money 40 After, Nikhil Varma, Head - Bancassurance, Wealth Management, IDFC FIRST Bank, explores key strategies for achieving financial independence.
From creating a second income stream to managing expenses and harnessing the power of compounding, his insights can help you build long-term wealth.
#IDFCFIRSTBank #OutlookMoney40after40 #OutlookMoney #CelebrateRetirement
From creating a second income stream to managing expenses and harnessing the power of compounding, his insights can help you build long-term wealth.
#IDFCFIRSTBank #OutlookMoney40after40 #OutlookMoney #CelebrateRetirement
Category
📚
LearningTranscript
00:00Well, you're at a spot right now where I all understand that two days of overwhelming
00:13information, right?
00:14I mean, it's so much awareness, so many speakers speaking, and so many valuable inputs, and
00:18sometimes you're in a position where a speaker really doesn't know, okay, fine, everything
00:23is already out.
00:24Everybody is already aware of everything.
00:25Now, what is more that I can add to?
00:27And you're also in a spot where I know that most of you are just awaiting the most celebrated
00:32speaker to come and chat with you and engage with you.
00:35So it's a very difficult spot, but still, let me try and give you some closing remarks,
00:42I would say, or a wrap-up commentary, okay, right from the session that began yesterday
00:49in the morning.
00:50Nidhi, Indranil, Mr. Vaidanathan, and a lot of us today, I heard Sriram, and some of those
00:56efficient, great speakers who I've been looking forward to for so many, you know, years,
01:03all of them have given some real great commentary.
01:05So now, I will just give a quick wrap-up, so that all of you now know, now you all know
01:10how to do it, or probably what to do it.
01:13But sometimes you'll get lost.
01:15Okay, fine.
01:16What next?
01:17Right?
01:18These are some steps that you need to know.
01:19So I'm going to spend some 10 minutes on those next steps.
01:24So we all spoke about living too long.
01:27So what does it exactly mean?
01:29All right?
01:30We all know that probably in the 40s, 50s, the life expectancy was obviously less.
01:36And today, you must have heard, the life expectancy is about 73, 74.
01:41Well, honestly speaking, yesterday I also heard Mrs. Shunai speaking that women are out living.
01:46Men.
01:50Okay.
01:51All right.
01:52I'll go back on stage.
01:53So, I always talk about this in a lighter moment to everybody.
02:00So we all love our culture, love our heritage, we all love our festivals, okay?
02:06So Karvachot is working both ways now, okay?
02:08So it's not just men who is going to live longer, it's also going to be your women who's going to live longer.
02:15So women today are averaging about 74, 75, and men are in the range of about 71, 72.
02:20What exactly means is, just remember this, very simple.
02:22At least the math or data suggests that every 10 years, your life expectancy is going up by 4 or 5 years.
02:30Okay?
02:31And 65% of India today is under 35 years of age.
02:34What does it mean?
02:36It clearly means that a couple of decades away, so we are talking about 40 after 40, probably we are looking at it 20 years.
02:44But what if it's beyond that, 30, 40, and there's a chance that you'll all cross 100 over the next 30 years.
02:51People will start living that longer.
02:55So, yes, like what Sumit Madan in the afternoon was saying, it's an insurance wake-up call.
02:59It's a wake-up call.
03:00You have to really plan that much in advance.
03:02So, also remember, of course, yesterday we've been hearing retirement, right?
03:08Nobody wants to get retired.
03:09We just heard another gentleman talking about it, nobody should retire.
03:13Of course you will not retire.
03:13But what are we talking about is financial independence.
03:16It's about a steady second income.
03:19Of course, you will all do something alternatively, but still, a steady second income is important.
03:25So, what is really happening?
03:28Look at this.
03:28The average member of household, which was in the range of about six-ish a few decades back, is now about four and a half.
03:36Now, 57% of people believe that retirement corpus will exhaust in 10 years.
03:41We heard this over the last two days.
03:44And that's really a very, very big reality.
03:48And we'll talk about it in the next slide.
03:50And 57% of Indians today still believe that their children will take care of them.
03:58Now, of course, the family ecosystem is very, very strong in India.
04:03The social ecosystem is very, very strong.
04:05But we all are getting urbanized in our thought process.
04:09Today, if you look at it, we are getting into more urbanized culture.
04:13And obviously, our children from the rural India are coming to the towns and towns to cities.
04:20And today, it's a global world.
04:21We are all probably traveling abroad, living abroad, and so on and so forth.
04:25So, the dependency on children, obviously, like we all know, I have two daughters.
04:31And I wouldn't want to be a burden on them, right?
04:36I mean, we take care of our parents.
04:37That's because of the way we've all been bought up.
04:40But that's not going to be a reality maybe 10, 20, 30 years from now.
04:44So, it's very, very important that today's generation, the 40s, 50s, or in the 30s,
04:49also start realizing that we will have to be on our own, right?
04:52We are going to live till 80, 90 probably.
04:56And how will we ensure that steady income?
05:00And, of course, we heard about medical inflation.
05:02Probably today, it's at its peak, 14, 15% is a big reality.
05:07So, this is something which is very, very interesting.
05:12Everybody's spoken about it.
05:13But let me just put some numbers to it so that we all realize what it exactly means.
05:18Is your money really working for you?
05:21So, if your monthly expense today is 50,000 rupees, what is it going to be about 25 years
05:26from now?
05:27It's going to be more than four times, right?
05:33So, that's the effect of inflation.
05:36Just a 6%, that's what we talk about today.
05:39That's how your money is going to depreciate.
05:43So, if you have 50,000 in the box today, it's going to be less than one-fourth.
05:48That's how your money is really depreciating or, I would say, completely eroding.
05:55So, your money is going to be less in future.
05:58We spoke about compounding, right?
06:03What does that exactly mean?
06:06I mean, just imagine if your money doubles every day for the next 30 days or 31 days.
06:12Any idea what's that number going to be?
06:14If your money doubles every day, what is that mean?
06:24You heard about compounding?
06:26So, money, if it doubles, it's about more than 100 crores in 31 days, right?
06:30That's the advantage of starting early.
06:32We all heard over the last two days what compounding really means.
06:36So, if you start, just imagine, I'm just giving a very simple stat here.
06:39If you start at the age of 25, just with an amount of 20,000 rupees per month, very simple,
06:47just 20,000 rupees per month, and if you invest 72 lakhs rupees, yesterday, Nidhi spoke about
06:52a corpus.
06:54If you live for 80, 85, Nidhi spoke about some corpus of 9 crore will be required to sustain
06:59your retirement life or your second income.
07:01So, that's going to be 7 crore.
07:04But if you start at 45 and invest the same amount, you'll have to probably do three times
07:09of that investment to probably reach 1.5 crore.
07:13So, 30 years of investment with obvious 10 years of investment is clearly a wake-up call.
07:19Right?
07:19So, important.
07:25And thanks to Seema.
07:27Seema also gave me some very good inputs on bucket strategy.
07:30Just two more slides, so just bear with me here.
07:33I'm just going to connect to you saying, now we all know too many things about last two.
07:39I said, you're really flooded with a lot of information.
07:41Now, what to do?
07:43Okay?
07:43So, I've just taken a very, very simple example, ladies and gentlemen, of about just
07:4712 lakhs.
07:49Okay?
07:4912 lakh is the new in thing, right?
07:52India is practically going to be living in the...
07:55It's a tax-free economy now, thanks to our finance minister.
07:59So, if you are earning up to 12 lakh rupees, technically you're not paying any tax.
08:02So, I've just taken that example of 12 lakhs.
08:06Is that really enough?
08:07Let's figure out.
08:08Okay?
08:08I'm going to give you some examples.
08:11So, what do you really want to do now?
08:12So, I've just...
08:14Let's understand priorities.
08:15What are our priorities today?
08:17What is India thinking?
08:18Where does India really spend?
08:20So, India's first financial priority, and this is coming out for our retirement survey
08:24that we did.
08:25Okay?
08:26And that's where you'll realize where retirement is.
08:28But let's look at it.
08:28What is India's priority today?
08:30India's priority today is still marriage.
08:34We still give importance to marriage.
08:35While I don't know whether it'll remain a priority at number one or will it go down the
08:41order, we don't know as yet.
08:43Because in India, we still believe that if I went to their marriage, then I'll have to
08:49call them in marriage, etc.
08:50While our kids are not even interested.
08:53That's what we hear today from most of our younger Gen Z kids.
09:04But still, having said that, as I said, we belong to a community where, you know, social
09:10barriers are really different.
09:13So, but that still is a very important reality.
09:17Second is, of course, security and education.
09:19Children's security and education.
09:21We always think, like for me, for my daughters, Ira and Ria, I would say I'm not interested in
09:28your marriage, but I'll, of course, give you the best of education, right?
09:32So, that's still the second security.
09:34Medical emergencies.
09:36We all heard about it.
09:3715% inflation.
09:39Yesterday, Tappan, a single from Bajaj Allian spoke about that every year, you know, if there
09:45is a medical exigency, 10% of India is just coming under poverty just because of a medical
09:52exigency in the family.
09:53And that's a very, very hard reality.
09:56Improving lifestyle, right?
09:59We are transitioning into a very different kind of a standard of living.
10:05That clearly means that we spend quite a lot on our lifestyle, the way we live, the social
10:12ecosystem is also look, I mean, today we like, for example, we buy phones every three years
10:18and we spend 20, 30, 40, 50,000 bucks on a phone.
10:21Practically, there was only one instrument in the house a couple of decades back, but
10:27today we have a landline and if you have a family of four, you all have mobile phones.
10:32So, practically, we're spending nearly more than a lakh, lakh and a half only on mobile
10:37phones.
10:39Retirement.
10:39Just imagine, it is still lower the priority and I'll tell you why.
10:43Of course, health and wellness, thanks to a lot of initiatives, I think health and wellness
10:48is becoming critical, which is important for our emotional and health well-being, which
10:54is going to be covered in our next speaker, the holistic happiness, which I'm sure he'll
11:01cover there.
11:01And, of course, the entrepreneurial mindset in India has kick-started over the last couple
11:09of decades, so I think that is going to boom.
11:11So, we are just saying that in case, if you have to plan the next three steps, from your
11:18cash bucket, we'll have to probably allocate about 40% of your money in your cash bucket,
11:22and next slide, the last slide, which will tell you the break-up, you have to probably
11:27look at 30% allocation in your income bucket and about 30% allocation in your growth bucket.
11:33Very simple.
11:34Okay?
11:35Let's understand the example now.
11:37Very, very simple example, guys.
11:40Okay?
11:40Now, as I said, I'm just, well, today, of course, just about maybe one crore Indians would be
11:50earning a kind of income of 12 lakhs or above.
11:56Today's India income is less than 3 lakhs per annum.
11:59Okay?
11:59So, I know this example would look probably four times of that.
12:03But what I'm trying to explain is, just imagine that you're earning 12 lakhs only over the
12:08next 20, 30, 40 years.
12:11I'm not making any change here.
12:14Okay?
12:14I'm just making the income constant.
12:17All right?
12:17So, if you are allocating 40% of that, that's your cash bucket.
12:21So, it's just about approximately 4.8.
12:23I'm just rounding out to 5 lakhs.
12:245 lakh is your cash bucket.
12:26Now, just imagine, what do you do with that 5 lakh?
12:29Yesterday, we spoke about that.
12:30So, we spoke about the priorities, your exigencies that you have.
12:37So, if you do not have a health or a term insurance cover, which is actually very, very cheap.
12:45So, if you start at the age of 25 approximately, okay?
12:49Today's Gen Z.
12:50If you buy, you can obviously buy anytime.
12:52Sumit Madan mentioned that you can buy an insurance cover anytime.
12:56But just imagine, we are still one of the cheapest markets in your term or health.
13:01Both are very, very cheap in India.
13:02So, just at about close to 20 to 25,000 rupees, you can actually get a 25 lakh cover and a 1
13:09crore term.
13:10Which is throughout life.
13:12I'm telling you that you can actually cover your life for 100 years at a cost of less
13:19than 20,000.
13:21You can actually buy a 10,000 rupee health cover and get a 25 lakh family floater today
13:29that's available.
13:30The entry age of a health insurance plan today, I mean, we are so advanced.
13:35There was a product that I just saw.
13:38The entry age is 125 years.
13:40Which means you're going to live more than 100.
13:41You can actually buy a health cover even if you're at 125 years.
13:45And that's how the regulation has changed.
13:48And all the new insurance players who are going to come into India, thanks to the 100%
13:54FDI move by the government, it's going to be available now, affordable, accessible, and
14:01available at any age bank.
14:03So, at 125 years, if you can buy a health cover, there's nothing like it.
14:07Right?
14:08Just imagine anything happens to you till age 100.
14:11You will still leave a legacy if you have some kind of a priority at that point in time.
14:16Just imagine your third or the fourth generation can actually benefit from this particular simple
14:22cover.
14:23Now, it's just a 5 lakh.
14:25And 5 lakh also can start giving you second income.
14:28There are instruments, various instruments available, which we'll talk in the next slide,
14:32which can start giving you between 7 to 8, 7.5%.
14:34Even savings bank account in our bank is in the range of 7% plus, of course, beyond a particular
14:42savings amount.
14:45But that is also a kind of a second income.
14:48Now, what do you do next?
14:48Next, you can also allocate just about 30,000 rupees per month for 15 years.
14:54Now, I'm talking about the income bucket.
14:57Okay?
14:57Very simple.
14:58I think Sriram mentioned about NPS historically has been giving what?
15:0214%?
15:03We've got 14% return.
15:04I'm just taking a very simple 12% annualized return, which is simply diversified.
15:11So, you can just diversify your 30,000 rupees, which is 30% of your bucket into NPS, or you
15:17can look at your fixed maturity plans, your fixed deposits, and so on and so forth.
15:23And that will start giving you nothing less than at least 4 lakh per annum, which can be
15:29used across any priorities that we saw in the previous slide.
15:32It is that simple.
15:34But the problem with India, like I said, is that we cannot see anything beyond 10 years.
15:40That is where the problem starts.
15:43Okay?
15:43We dip into that short-term savings all the time.
15:47And that's where the problem starts.
15:48Problem is, we believe in real estate.
15:50We believe in physical gold or any kind of instrument which is near us, which we want
15:54to get a feel of.
15:56Right?
15:57But are they retirement funds?
15:59Are they retirement purpose?
16:00The answer is no.
16:01The problem is there is lack of trust.
16:04We do not believe in a bucket called growth bucket.
16:10We don't believe in this.
16:12The concern is, if you allocate 30% of your income into 15, 20, 25 years and above kind
16:20of a plan, look at the corpus that you do.
16:22Yesterday, Nidhi spoke about an exact requirement of 9 crores.
16:26So if you just, I'm just giving an example.
16:28You just imagine India is just earning 12 lakhs for the next 20 years.
16:32And your income just doesn't grow.
16:34I know you'll start with 3, 4 lakhs.
16:35But over a period of time, I'm sure you'll catch up.
16:38And that's 12 lakhs.
16:39I'm just making that example of 12 lakhs being constant income for the next 25 years.
16:43You invest just for 30 years.
16:4630,000 rupees.
16:47Your corpus is 10 crore.
16:49And you can draw 3 lakh rupees per month, almost tax-free for the rest of your life till age
16:57100.
16:58Subject to your term and your health cover is always available to you.
17:02So it's that simple, guys.
17:03Sometimes we make things complex.
17:05We make things complicated.
17:06And we are hesitant to commit ourselves for the long term.
17:11Long term works.
17:12Partnerships work.
17:13Trust works.
17:14Yesterday, I'm just wrapping up.
17:16Yesterday, we spoke about the private.
17:19So if the consumption is going to increase, and thanks to the new budgetary guidelines,
17:24there is extra money available in your pocket.
17:26Please allocate them towards your growth bucket, which will definitely guarantee, give you a second income.
17:33So thank you very much, and happy retirement.
17:36Thank you very much.
Be the first to comment