Plan Early For Sunny Winter Of Life
Outlook Money|May 2019
Plan Early For Sunny Winter Of Life

Approach towards retirement is changing and so are the needs

Aparajita Gupta and Sampurna Majumder

You work and work

For years and years

You’re always on the go

You never take the minute off

Too busy making dough…”

The famous Doris Day number holds true for every working individual. We spend most part of our lives earning money to make ends meet and save for retirement. But how much is enough to lead a contented life even after superannuation?

People’s approach towards retirement is changing and so are their needs. After hanging up their boots people persue those goals that remained unfulfilled during their working life. Of course maintaining a proper lifestyle beating inflationary pressure is a major focus area too.

Now the question is when and how should one start investing? Domain experts suggested that for a sound retired life, the earlier one starts investing the better it is. Apart from traditional tools like fixed deposits, life insurance and public provident funds, experts harped on having mutual funds and systematic investment plans to beat the inflationary pressure.

The Aegon Retirement Readiness Survey 2017 found that Indian workers score highest among 15 countries surveyed when it comes to retirement preparedness. They also take their health seriously, with many establishing healthy habits in order to safeguard their future health in older age.

It highlighted that while Indian workers feel they are doing well in terms of retirement preparedness, especially compared to respondents in other countries, there is more that can be done to make sure that they are retirement ready. Conversely perhaps to other countries in the survey, the changes required tend to be more structural in nature in terms of the retirement options provided to them by both employers and private savings products.

This report focuses on the responses to an online survey of 1,000 people in India, including 900 workers and 100 retirees.

But how much money should one set aside every month to retire tension free? Though it is a relative concept, domain experts feel if a person sets aside 10-15 per cent of her salary from the very outset of the career then one can accumulate a handsome corpus that would take care of most of the needs post retirement.

Often financial investments made to save annual Income Tax are not aligned with our long-term goals of life.

Having said that it is extremely crucial to build a retirement fund keeping in mind inflationary trends of the future. The monthly requirement over time will keep increasing. For example Rs 40,000 monthly requirement for someone who retires today at five per cent inflation will be almost Rs 92,000 in 17 years. But the investments that most retired people make are into safe options like debt, where the amount they will get in year one versus year 17 would almost be similar or lesser, but not more, said Shweta Jain, certified financial planner and Founder, Investography.

“So, they will start to eat into their capital pretty soon. Beating inflation is the single biggest problem retired people will have, simply because they have not provided for it in their plan. Medical costs and inflation are two major costs that people ignore. Our lifespan is increasing, but the quality of life still needs work. To get access to good healthcare we will need to ensure we provide for inflated costs and not just costs at today’s value. We also need to ensure that we don’t spend too much at the beginning,” she added.

Hence, while building the corpus overdependence on one single asset class to generate return should be avoided.

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May 2019