Debashis Basu, editor Moneylife, explained the dangers of insufficient planning and the assumptions to be made while planning for better retirement
Moneylife Foundation conducted another successful seminar on retirement planning where Debashis Basu, editor Moneylife, discussed the various aspects of retirement planning and why you should not neglect it. Using a fictional character called Mr Kumar, Mr Basu detailed the different factors that influence how much one can save and how long one’s corpus is expected to last. Many are unaware how expenses could just balloon by the time of retirement. “Many don’t bother to make the calculation, even though some parts are not difficult at all. One reason is that there is much that is simply not known. Many assumptions are to be made when making a retirement plan,” explained Mr Basu. You don’t know how long you will live for, but you can calculate what your expenses will be, how inflation will affect expenditure, and much else.
While saving for retirement, one needs to be prepared for the six unknowns—under-investment risk, the risk of longevity, failure to account for sudden spikes in monthly expenses, the dominance of a non-income-generating asset like real estate in the portfolios, low growth of assets and post-retirement support.
Mr Basu said, “Under-investment risk is the danger of not having saved or invested enough for retirement, if not both.” Indians do save their money, but often don’t look beyond fixed-income schemes, such as bank FDs or investment-oriented insurance products. Mr Basu said, “You may have under-invested, which means that you have simply not saved enough.” With poor returns from investment and high inflation, by just saving in fixed income investments one would find it difficult to create a sustainable corpus for retirement. If your income grows as inflation rages on, it may be possible to ignore the adverse effects of inflation. But when your income is static, it becomes a major problem. Therefore one needs to choose the right products for investment, those, which can generate wealth over the long term.
“The second risk, longevity, is a big concern. The longer you live, the more likely it is that you will run out of money,” said Mr Basu. Like interest rate and inflation, this is another factor that is out of your control, he highlighted. Therefore, one needs to be prepared for the unforeseeable.
The third factor, failure to account for sudden spikes in monthly expenses pre-retirement and post-retirement, is one that is completely unknown. Unexpected expenses before retirement may need you to pull out from your retirement corpus. Even post-retirement, you cannot, for example, predict when you’ll need surgery in your later years. Mr Basu said, “We have assumed that your retirement expenses will be 80% of current expenses. But what about the month when you need surgery or are under costly medication? At this time, it could be 135% of the current expenses.
One needs to consider their assets at the time of retirement, as well. The problem of over-reliance on property is another concern. “Real estate works just like stocks. In a good economic scenario, real estate appreciates; at other times, it can be static,” Mr Basu said, adding equity exposure is a good way to achieve a sizeable corpus.
When it comes to post-retirement income and support, Mr Basu said that “Indian children do support their parents, so perhaps you won’t need to bother about big healthcare costs.” This can make a huge difference to your retirement requirements.
The session concluded with Mr Basu outlining the steps one could take to calculate how much is needed for retirement. This was followed by an engaging Q&A session where Moneylife Foundation members raised queries related to retirement.
Phone and email ID sharing of around 60 lakh users of Facebook has highlighted the risks we are running over the internet, especially through social networking sites. Time for safeguarding yourself on Facebook, Twitter, LinkedIn and other social media?
Social media networking site Facebook has admitted that due to a software bug, phone numbers and email addresses of its 6 million (60 lakh) users were ‘improperly’ shared. This incident highlights the need to strictly safeguard one’s privacy in the virtual world, as well. Just imagine, what would have happened if the bug had exposed credit card details or money related info instead of just phone numbers and email IDs? But more about it later.
Techcrunch.com has quoted a Facebook spokesperson as saying that the bug had been live since last year and was discovered last week, adding that its security team fixed the bug in less than 24 hours after it was brought to their notice. Shocking, isn't it? The bug was there in Facebook for over a year and it may have explored data of more than 6 million users, that the social networking site is unaware of.
In a blog post, the Facebook security team said, “We've concluded that approximately 6 million Facebook users had email addresses or telephone numbers shared. There were other email addresses or telephone numbers included in the downloads, but they were not connected to any Facebook users or even names of individuals. For almost all of the email addresses or telephone numbers impacted, each individual email address or telephone number was only included in a download once or twice. This means, in almost all cases, an email address or telephone number was only exposed to one person. Additionally, no other types of personal or financial information were included and only people on Facebook—no developers or advertisers—have access to the Download Your Information (DYI) tool.”
Explaining the ‘bug’, the security team said, “When people upload their contact lists or address books to Facebook, we try to match that data with the contact information of other people on Facebook in order to generate friend recommendations. For example, we don’t want to recommend that people invite contacts to join Facebook if those contacts are already on Facebook; instead, we want to recommend that they invite those contacts to be their friends on Facebook.”
“Because of the bug, some of the information used to make friend recommendations and reduce the number of invitations we send, was inadvertently stored in association with people’s contact information as part of their account on Facebook. As a result, if a person went to download an archive of their Facebook account through our DYI tool, they may have been provided with additional email addresses or telephone numbers for their contacts or people with whom they have some connection. This contact information was provided by other people on Facebook and was not necessarily accurate, but was inadvertently included with the contacts of the person using the DYI tool,” it added.
Facebook has sent emails to those whose phone numbers and email ID it shared due to the bug. The email reads...
“Here is your contact Information (inadvertently accessible by at most 2 Facebook users):
We estimate that 2 Facebook users saw this additional contact info displayed next to your name in their downloaded copy of their account information. No other info about you was shown and it’s likely that anyone who saw this is not a stranger to you, even if you’re not friends on Facebook.
We recognize that mistakenly sharing contact info is unacceptable, even if you are acquainted with people who saw these details, and we’ve taken measures to prevent this from happening again. For more information on the bug, please read our blog post.”
Coming back to the question of risk to privacy, there is nothing as 100% “hack-proof” in the world. Almost everything that you feed over the internet can be accessible, including your credit card number and card verification value (CVV) code. At the most, what you can do is take small precautions.
Coming back to exploitation of financial data, just two years ago there was a breach into Sony’s PlayStation video game network leading to a theft of millions of names, addresses and possibly credit card details.
Earlier, this month, people from India witnessed money being withdrawn from their bank accounts in Greece. This was possible because some scamsters using scamming machines on some ATM centres, then collected the data and shared it with like-minded people from Greece. We hope this has nothing to do with the debt crisis Greece is going through, although!
But it is not just the social media sites, where your data, financial details are left to be exposed. Information technology (IT) systems across several banks in India are also not without glitches that affect most of the customers. One of the many issues that Moneylife has taken up with the Reserve Bank of India (RBI) is the need for a technology audit of banks and the systems and processes that they adopt. While RBI’s department of supervision inspects banks, it is not clear if this covers the core banking technology that now drives all big bank operations. Over the years, individual banks have often configured systems in a manner that hurt depositors’ interest. And, since technology changes are complex and outsourced, the process of incorporating even small, but necessary changes, is both cumbersome and expensive.
Online thieves love your social media page
According to an article published by ConsumerAffairs.com, online thieves love your social media page because of the personal info shared on such sites. “There are people who sit around all day, every day, trying to put together the small pieces of information that float around cyberspace. In fact, people use social media so much these days, they sometimes forget how much of their personal info is really out there,” the article says.
In a study conducted by Javelin Strategy & Research, it was found that 68% of people who use social media gave their birthdate and 63% posted where they went to high school. In addition, the survey showed that 18% of users listed their phone number on their social media page and 12% told followers the names of their pets.
“And because of this, all a shady person has to do is connect each dot, and presto, he has enough information to carry out his evil deed,” ConsumerAffairs.com said.
How to protect yourself from online exposures?
1. Keep changing your password often. Make it a combination of special characters, letters in upper and lower case and include digits. Choose a password that doesn’t contain a readable word. Mix upper- and lower–case letters. Use a number or symbol in the middle of the word, not at the end. On a safer side, make the password bigger than 13 letters. (read Crack-proof Passwords )
2. Do not use the available set of questions for guessing a password on any site. Always create your own question and do not share the answer with anyone.
3. Do not share your credit/debit card number, PIN and CVV code with anyone, including somebody from the issuing company, like the telecaller from your bank. A strict NO to share this info on social media sites.
4. Try not to share your location details on social networking sites.
5. Especially for Facebook, allow only selected ‘friends’ that you know personally to see your personal details. Go to Home-Setting-Privacy and change the settings accordingly.
6. Do not post too much information on social media pages.
7. Do not reveal more information through photos like your location and family and friends etc.
8. Disable location sharing in your smartphone. For Android-based devices go to Settings-Location & Security-My Location- then disable it.
9. Try not to use a public computer, especially one which runs a Windows operating system. The memory management feature in Windows OS retains any data that you input in the normal course of operation.
The market will find the going tough unless there is clarity about the rupee and global capital flows
The domestic market finished in the red on global concerns after US Federal Reserve chief Ben Bernanke suggested that the central bank may scale down it bond-buying programme later this year. The decline in the market resulted in the benchmarks ending lower for the third week in a row. Global worries, which saw the rupee tumbling to an all-time low of 60 against the dollar on Thursday, also added to the market gloom.
The market is expected to remain volatile in the coming week on account of the expiry of the June futures & options derivatives contract. Current account deficit figures for the March quarter, which would be released by the government on Friday, will also be closely watched by investors.
The Sensex declined 403.69 points (2.1%) to 18,774 and the Nifty closed the week at 5,668, down 141 points (2.42%). Although the benchmarks settled in the green on three of the five trading days, losses on the other two days were responsible in bringing the market down. The market will find the going tough unless there is clarity about the rupee and global capital flows.
The market settled higher on Monday on buying in auto, capital goods and technology stocks in the second half of the day. Selling pressure from banking, consumer durables and PSU sectors led the market down on Tuesday. The market settled with minor gains on Wednesday amid volatile trade on nervousness ahead of the announcement from the US Fed about the future of its stimulus programme.
The market saw its highest percentage loss in the past 21 months on Thursday, which led the rupee making fresh all-time lows. Late buying in IT and technology stocks, as the declining rupee improved the prospects for IT exporters, helped the market close in the positive terrain on Friday.
BSE TECk (up 1%) was the lone gainer in the sectoral segment while BSE Realty (down 6%) and BSE Bankex (down 5%) were the biggest losers.
Bajaj Auto (up 4%), Wipro, Maruti Suzuki (up 3% each), Hero MotoCorp and Bharti Airtel (up 1% each) were the top gainers on the Sensex. The key losers were Jindal Steel & Power (down 16%), Hindalco Industries (down 10%), NTPC (down 6%), ICICI Bank (down 5%) and HDFC Bank (down 4%).
The major gainers on the Nifty were Ambuja Cements (up 5%), Bajaj Auto (up 4%), Maruti Suzuki (up 3%), Hero MotoCorp and Cairn India (up 1% each). The main laggards on the benchmark were JSPL (down 16%), Bank of Baroda (down 13%), Punjab National Bank (down 10%), Hindalco Ind and Jaiprakash Associates (down 9% each).
The United Progressive Alliance (UPA) government, finally seems to have woken up to the reality of the worsening economic situation, made worse due to the falling rupee, rising current account deficit (CAD) and concerns over withdrawal of funds by foreign institutional investors (FIIs). While the Cabinet Committee on Economic Affairs (CCEA) came up with several measures, finance minister P Chidambaram tried to calm the nerves over the domestic currency that touched a lifetime low on Thursday.
The rupee on Thursday plunged by 130 paise to hit life-time low of 60 against the US dollar in early trade on the Interbank Foreign Exchange on strong demand for the American currency from banks and importers. The Indian unit had earlier hit its all-time intra-day low of Rs 58.98 on 11th June.
The Reserve Bank of India (RBI), in its mid-quarter review of the monetary policy on Monday, decided to keep key interest rates, cash reserve ratio (CRR) and repo rates unchanged. According to economists, external risks, particularly weakness in the rupee, may have prevented the RBI from cutting rates. The CRR stands at 4% and the repo rate has been left unchanged at 7.25%.
India’s exports contracted by 1.1% year-on- year in May to $24.5 billion compared to $24.77 billion in May last year. Imports grew by 6.99% to $44.65 billion during the period, leaving a high trade deficit of $20.1 billion, government data showed.
In international news, European Union finance ministers failed to secure an agreement on how best to downsize or close banks without calling on taxpayers to bail out the ailing lenders. The breakdown in negotiations could weaken the trust in Europe’s ability to stabilise its financial system.
US Fed chief Ben Bernanke, at the end of the two-day Federal Open Market Committee meeting on Wednesday, said the central bank may scale back its monthly bond-buying programme later this week and end it when the unemployment rate falls to 7%, most likely by the mid 2014. The US jobless rate was 7.6% in May, up from 7.5% in April.