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Retirement & Long-Term Planning
Plain-language definitions from the time.money glossary.
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Retirement & Long-Term Planning
9 terms- Employees' Provident Fund (EPF)
- A mandatory retirement savings scheme for salaried employees in India, with contributions from both employee and employer, government-set interest rates, and EEE (exempt-exempt-exempt) tax treatment.
- Inflation
- The rate at which the general price level rises over time, eroding the purchasing power of money that isn't invested to keep pace. India's long-run average inflation has hovered around 5 to 7% a year, a key input in any retirement or goal-planning calculation.
- National Pension System (NPS)
- A government-regulated, market-linked retirement savings scheme open to all Indian citizens, offering an additional ₹50,000 tax deduction under Section 80CCD(1B) over and above the Section 80C limit, with returns dependent on the chosen equity-debt mix.
- Power of Compounding
- The effect by which investment returns themselves start earning returns, causing wealth to grow exponentially rather than linearly over time. The earlier money is invested, the longer compounding has to work, which is why starting early tends to matter more than starting big.
- Public Provident Fund (PPF)
- A government-backed, long-term savings scheme with a 15-year lock-in, quarterly-revised interest rates, EEE tax status, and an annual contribution cap of ₹1.5 lakh, a low-risk anchor for the debt portion of many long-term Indian portfolios.
- Real Rate of Return
- The return on an investment after subtracting inflation, the actual increase in purchasing power. A fixed deposit earning 7% in a year of 6% inflation delivers a real return of roughly 1%, not 7%.
- Retirement Corpus
- The total sum of money an individual needs to have accumulated by retirement to sustain their desired lifestyle for the rest of their life, factoring in inflation, expected longevity, and post-retirement returns.
- Retirement Readiness
- A measure of how on-track a person's current savings and investment trajectory are, relative to the retirement corpus they'll actually need, typically expressed as a percentage or a gap amount rather than a single yes/no answer.
- Rule of 72
- A quick mental-math shortcut to estimate how many years it takes an investment to double: divide 72 by the expected annual rate of return. At a 12% return, for instance, money roughly doubles every six years.