Retirement Planning – Start now, Save more, Retire rich

Retirement planning ensures that you will continue to earn a satisfying income and enjoy a comfortable lifestyle, even when you are no longer working. An increasing number of young Indian professionals are moving away from the traditional joint family structure. Since support no longer comes easily, parents have realized the need to provide for themselves during their retirement years.

Until recently, many young Indians in there 20s and 30s were ignorant towards retirement planning and were not taking it seriously. For them, retirement was some thing that was too distant.

However, smart advertisement campaigns by private life insurance companies like ICICI Prudential’s “Retire from Work, not from Life”, HDFC Standard’s “Retire with Pride, Live with Self Respect”, and more recent one from Ageon Religare “How much pension will you need? Know your Correct Pension amount.” have helped in increasing the awareness about retirement planning.

Your retirement planning does not end once you have taken a retirement plan from any of these Insurance Companies. Its just a beginning, and if you start at an early age it is extremely helpful. Still wondering why do you need a retirement plan? Here are some of the reasons :

1. Inflation:

   Due to inflation, value of money keep decreasing year-on-year, so the value of Rs.100 five years ago was much higher than the value of Rs.100 today. As you need to worry about it, you also need to account for inflation adjusted returns on your investments, while planning for your retirement.

2. Increasing Life expectancy:

   Increased longevity has been the greatest single benefit to Indian citizens since independence, a benefit spread across all states and income levels. The life expectancy, as on 2007, for males at birth is 67 years and 71 years for females. The globalization of modern medicine and medical practices has globalised high life expectancy too. With advancement in medical technology life expectancy is likely to increase. Result: You will have to fend for more number of years post retirement.

3. Medical emergencies:

   With age come health problems. With health problems, come medical expenditure which may make a huge dent in your income post retirement. Failure here could lead you to liquidate (sell) your assets in order to meet such expenses. Remember medical insurance do not always suffice.

4. Changing Social Structure:

   The culture of joint family is changing. Today, an increasing number of young Indians are staying away from their families due to employment. Hence people have to develop a corpus to last them through their retirement without any help from family.

5. No government sponsored pension plan:

   Unlike the US and UK where they have Roth IRA and state pension respectively as social security benefit during retirement, the government of India does not provide such benefits. Only 4% of India working population- mostly government employees – are covered by pensions. The remaining 96% comprises self-employed and salaried professionals who do not have a formal, mandated provision for pensions.

6. Job hopping:

   With youngsters hopping jobs regularly they are unable to get any substantial benefit of plans like super annuity and gratuity. As both these plans require certain number of working years spent in the service of a particular employer.

There’s no easier way to begin retirement planning than by saving through a workplace retirement accounts like Employee Provident Fund and Family Pension Fund and diversify it, on your own, by taking adequate and suitable insurance cover and investing in a mix of asset classes.

Start now, Save more, Retire rich.