A MUST FOR EVERYONE
- India is a country where traditionally people are not oriented for retirement planning in finances. There is a prevalent culture of joint family and the older generation expects the next generation to take care of them in the old age.
- Surely there is some form of retirement savings being done. But it falls far short of the actual need in absence of any proper planning with 100% financial independence. However, today there is an increasing need felt for retirement planning especially among those in the middle age group.
- What is the need to plan/save for retirement:
- Here are some of the reasons why the growing need for retirement planning is felt.
- ➤ Post-Retirement Life: Over the years, the average life expectancy has increased to almost 70 yrs. However, it also likely for one to live almost for 85-90 years since today. For a person, retiring at say age 60, it is likely that 30 years of his would be in retirement. This thought itself arouses a shock and concern, and any sane person would feel the need to plan wisely for the future. Post retirement, one would need to provide additionally for medical care, costs for any operations of surgeries, for any passion or hobby to pursue, etc. With rising costs of living, urbanisation & growing needs, factored with inflation for 30 years: the need for starting to save immediately for retirement assumes great significance.
- ➤ Self-Dependence: Earlier after retirement, children were supposed to assume the role of financial care-taker in times of personal/medical emergencies but off late people realize the importance of planning for retirement during their working life only. This has also to do a lot with growing complexity of life with multiplicity of needs, increasing importance to money, ambitions of the younger generation coupled with the desire for total freedom in decision making, etc. To put it in simple terms, the working generation today wish to have a dignified & independent retired life without taking any chances on the next generation for financial support & care.
- ➤ Urbanisation & Migration: The rapid urbanisation is reshaping how we live our lives. Trends show that there is a change from the joint family system to nuclear family system due to many factors. The houses are becoming more expensive yet smaller. A large number of the working population is also migrating to the bigger cities for better work opportunities, largely giving rise to the culture staying away from the parents.
- ➤ Uncertainty of pension benefits: Although you may get pension benefits and the amount compulsorily saved in public provident fund can provide some support, yet it may not be sufficient enough. Moreover, in India, the states do not provide any social security for the retired people, so it becomes even more important to plan for retirement.
- What is Retirement Planning?
- Retirement planning is the process of arranging finances to meet expenses during retirement period. The idea is to collect enough retirement kitty so that you get financial independence in managing your personal expenses. The important considerations that go into planning for retirement are…
- ➤ Financial assessment: What is the current income, expenses and savings and what amount needs to be saved to sustain the kind of lifestyle he/she wants at present and after retirement. Other inputs to consider are the kind of disposable assets & liabilities would exist after retirement and any business, hobby or other post retirement expenditure or income is foreseen.
- ➤ Goal Setting: It involves realistic goals about the standard of living that one wants post retirement and what should be the retirement income. Often, fixing the retirement age is also dicey as people may wish to retire early but may not be financially viable decision.
- ➤ Financial Planning: It involves ascertaining the retirement kitty requirement and managing resources to build the retirement kitty. It also involves managing the retirement kitty smartly after post retirement so as to comfortably provide for expenses during the retirement period.
