What is retirement planning?
Retirement planning means working out how much you will need each month after you stop working, for how many years, and where that money will come from; then saving and investing steadily during your working years to match. Government employees have a pension, but many people in private jobs, business or self-employment have no guaranteed retirement income.
In many Bangladeshi families, grown children look after their elderly parents, and that is a lovely part of our culture. But children have their own households, children and costs. Having your own retirement money keeps you independent and eases the pressure on the next generation.
Say Jamil is 30 and his household spends Tk 30,000 a month today. If prices rise by 7% a year on average, in 30 years, when he is 60, the same lifestyle will cost about Tk 2,28,000 a month. If he plans his retirement around today’s Tk 30,000, he will save far less than he needs. The numbers are only an example.
Why it matters to an investor
- To use the power of time: with retirement 20–35 years away, compounding has time to work. Start late and you must save much more each month to reach the same goal.
- To keep inflation in view: retirement costs will be paid at future prices, not today’s, and prices keep rising during retirement too.
- To shift risk in stages: when retirement is far off there is time to ride out ups and downs; as it nears, people usually think about moving money somewhere steadier.
- To balance it against other goals: you can borrow for a child’s education or a home, but nobody lends you money to retire on.
Retirement now lasts longer
According to the World Bank, life expectancy at birth in Bangladesh was about 62 years in 2000 and about 75 years in 2024. People who reach 60 usually live longer than this average, because the figure at birth also includes deaths in childhood.
So if you stop working at 60, it is wise to plan for 20 years or more of costs. Over that time, medical costs also tend to rise with age.
Source: World Bank
See the numbers as a table
| Life expectancy | |
|---|---|
| 2000 | 62 years |
| 2024 | 75 years |
Where retirement income can come from
- Job benefits: a government pension (for government employees), and at many employers a provident fund and gratuity. Check your terms of employment to see what you have.
- The universal pension scheme: under this government scheme, launched in August 2023, contributions during your working years buy a monthly pension for life from age 60.
- Your own savings and investments: money saved and invested steadily during your working years, drawn down gradually in retirement.
- Other sources: rent, a small business or part-time work, and family support. It is safer not to rely on these entirely.
Three steps to a plan
- Estimate the cost: start from today’s monthly spending and allow for inflation to reach the cost in your retirement years. Some costs may fall if you own your home or your children are independent; medical costs may rise.
- Find the gap: how much will come from a pension or other reliable income, and how much your own savings must cover.
- Start early and review regularly: begin even with a small amount, raise it as your income grows, and check the plan every few years.
Worked example
- Say two people each save Tk 3,000 a month and earn an average 8% a year on it (compounded monthly). Both stop at 60.
- The first starts at 25: over 35 years he pays in Tk 12,60,000 of his own money. At 60 he has about Tk 68,80,000.
- The second starts at 35: over 25 years he pays in Tk 9,00,000. At 60 he has about Tk 28,50,000.
Result: by paying in just Tk 3,60,000 more, the first ends up with about Tk 40 lakh more; that is ten extra years of compounding. Real returns go up and down, and inflation will reduce what this money can buy. The numbers are only an example.
Age
See the numbers as a table
| Start at 25 | Start at 35 | |
|---|---|---|
| 25 | Tk 0 lakh | Tk 0 lakh |
| 26 | Tk 0.4 lakh | Tk 0 lakh |
| 27 | Tk 0.8 lakh | Tk 0 lakh |
| 28 | Tk 1.2 lakh | Tk 0 lakh |
| 29 | Tk 1.7 lakh | Tk 0 lakh |
| 30 | Tk 2.2 lakh | Tk 0 lakh |
| 31 | Tk 2.8 lakh | Tk 0 lakh |
| 32 | Tk 3.4 lakh | Tk 0 lakh |
| 33 | Tk 4 lakh | Tk 0 lakh |
| 34 | Tk 4.7 lakh | Tk 0 lakh |
| 35 | Tk 5.5 lakh | Tk 0 lakh |
| 36 | Tk 6.3 lakh | Tk 0.4 lakh |
| 37 | Tk 7.2 lakh | Tk 0.8 lakh |
| 38 | Tk 8.2 lakh | Tk 1.2 lakh |
| 39 | Tk 9.2 lakh | Tk 1.7 lakh |
| 40 | Tk 10.4 lakh | Tk 2.2 lakh |
| 41 | Tk 11.6 lakh | Tk 2.8 lakh |
| 42 | Tk 13 lakh | Tk 3.4 lakh |
| 43 | Tk 14.4 lakh | Tk 4 lakh |
| 44 | Tk 16 lakh | Tk 4.7 lakh |
| 45 | Tk 17.7 lakh | Tk 5.5 lakh |
| 46 | Tk 19.5 lakh | Tk 6.3 lakh |
| 47 | Tk 21.5 lakh | Tk 7.2 lakh |
| 48 | Tk 23.7 lakh | Tk 8.2 lakh |
| 49 | Tk 26 lakh | Tk 9.2 lakh |
| 50 | Tk 28.5 lakh | Tk 10.4 lakh |
| 51 | Tk 31.3 lakh | Tk 11.6 lakh |
| 52 | Tk 34.2 lakh | Tk 13 lakh |
| 53 | Tk 37.5 lakh | Tk 14.4 lakh |
| 54 | Tk 40.9 lakh | Tk 16 lakh |
| 55 | Tk 44.7 lakh | Tk 17.7 lakh |
| 56 | Tk 48.8 lakh | Tk 19.5 lakh |
| 57 | Tk 53.2 lakh | Tk 21.5 lakh |
| 58 | Tk 58 lakh | Tk 23.7 lakh |
| 59 | Tk 63.2 lakh | Tk 26 lakh |
| 60 | Tk 68.8 lakh | Tk 28.5 lakh |
Common mistakes
- Thinking “there’s plenty of time” and putting off starting for years. Every year of delay raises the monthly amount needed later.
- Costing retirement at today’s prices, and forgetting medical costs in the retirement years.
- Withdrawing a provident fund or other retirement money when changing jobs and spending it on something else.
- Putting all your savings, just before retirement, into something whose risk you don’t understand or that promises “guaranteed big returns”.
In retirement planning, time is the most valuable thing you have: start early, even with a small amount, and cost it at future prices.