If you’re someone looking to spend a quality retired life, then retirement planning should be on your priority list. Often in our busy schedules, we forget to foresee the future and keep delaying our plans. But what we need to realize at the outset is, the sooner we start, the more we shall be able to accumulate till retirement.
Here are seven reasons why retirement planning should be on your priority list:
1. LONGER LIFE EXPECTANCY
The life expectancy of humans is consistently increasing across the world due to technological advancement in medical sciences. In India too, the average life expectancy of an adult of age 60 has extended to 78. That means 18-20 years post the working years (depending on whether you retire at 58 or at 60). To put this into context, you will need more funds for your future
2. A GOVERNMENT PENSION IS NO LONGER APPLICABLE
Most of us have grown up watching our parents work for government jobs. While that meant slightly lesser salary during the working years, it came with the comfort of a pension for a lifetime after retirement. Since 1st January 2004, the government has done away with the practice of providing a pension for new joinees and replaced it with NPS (National Pension System). What is then your source of income in the sunset years?
Private sector employees in India do not have a fallback option like a state sponsored pension. Unlike the US and UK where they have state-funded/sponsored pensions or social security benefits during retirement, India so far does not have anything similar matching that scale. This means you are on your own when you are retired.
3. ESCALATING COST FOR HEALTHCARE
With rising age, come new and health problems. Medical expenses make a huge dent in your finances post retirement. Studies show medical inflation is 14-15% a year. This means health costs potentially become 4 times of what they were just ten years ago. Take a proper retirement plan, and never lose sleep over long and multiple hospitalization. With a large enough retirement kitty or pension, post-retirement you will always be well taken care.
4. INFLATION
Price rise is a universal fact. The effect of inflation can be massive over a few years. A 5% inflation means Rs 100 will have the value of ₹ 95 a year later. But, a 5% decline is quite serious. Twenty years later a sum of ₹ 21 lakh will have the same purchasing power as ₹ 7.5 lakh today if inflation grows by 5% every year. In growing economies like India, the consumer level inflation can in fact be more than 5%.
Even when you are retired, some costs will always remain. You may not have EMIs, or you may not eat out much, but you will still need to buy groceries, medicines, and pay off utility bills. Plan your retirement in such a way that anticipated inflation is accounted for.
5. NUCLEAR FAMILIES
Long gone are those days when the elderly could rely on monetary support from a big family. The culture of the Indian families is changing as couples are going nuclear and staying separately. They are also having less children. Twenty-thirty years down the line there may not be many relatives to take care of you as a senior citizen. Children, when they grow up, want to relocate for jobs elsewhere. Plus, the pressure to earn money and have a decent lifestyle would not give them enough time to allocate for parents and elders.
Hence, it is vital to plan your retirement without expecting any financial help from your immediate family. There is a lot of mental satisfaction in having the ability to buy your own spectacles, medicines, provide food for yourself and also your spouse. Why should it change when you are 60? A retirement plan allows you to always keep your head high and live a retired life full of dignity and respect.
6. DEPENDING ON YOUR CHILDREN IS UNFAIR
For a lot of Indians, their retirement planning is their kids. I am not dissing the idea of joint families here. But depending on your kids for your finances is definitely unfair. For a young couple to be financially responsible for 3 generations (them, their parents and their kids) is not ok in any scheme of things.
Be responsible and plan well for your retirement in good time so that you are not dependent on anyone.
7. YOU CANNOT WORK FOREVER
You might think that I am used to a busy work life, I will get bored and do not want to stop working. I say so because the thought has crossed my mind several times. That still is no excuse to not plan healthy finances for retirement. Also, with such a competitive and youthful workforce, older people are bound to be on the end of the priority list, experience not withstanding. In case you do end up working till later than planned, when has extra money ever harmed anyone?
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