If there is ever a global optimism survey, India will earn the top slot. Despite the recent spate of bad news from the world markets, a non-existent social security system and the slow erosion of the joint family system, Indians are positive that they’ll have enough to see them through their retirement.
Life expectancy is shooting up and people are living for 20-25 years after they retire. Yet, only one in three Indians has some kind of retirement plan in place. There is a clear intent to save—a 2007 survey by IIMS Dataworks claims that over 80% of the 321 million paid workers are keen to have some form of retirement planning—but it rarely translates into action.
Does it matter that most people believe, however irrationally, that retirement will not be a financial strain? It does, simply because the decision to retire not only affects one personally and financially, but also has an impact on the people closest to them. Despite this, few of us even consider retirement planning. Part of the reason for this apathy is that the entire retirement scene has changed and, perhaps, Indians are finding it difficult to keep up with it.
How much do you need?Over the next several pages, we will calculate how large your retirement corpus needs to be, depending on your current age and number of years left for retirement. All calculations are based on the following assumptions: |
| • Both annual income and expenses grow at 7% a year. |
| • Inflation is taken at 6%. |
| • The expected rate of return on investments is a conservative 8%. |
| • The corpus is calculated for 20 years after retirement. |
Using future value calculations, we arrived at the retirement corpus needed to last the 20 years of retirement. Having done that, we worked backwards using the time value of money concept to arrive at how much one needs to save per month to achieve the desired retirement corpus. The examples provided are based on hypothetical cases and should not be treated as authoritative. |
Unlike earlier generations, which considered a government job an ideal employment as it guaranteed retirement benefits, the post-licence raj era generation has explored employment options that don’t come with automatic safety nets. This only increases the risk of the greatest retirement disaster—outliving your savings and having to settle for less after retirement.
Over the past two years, Money Today has tried to help the readers plan and invest for the future. In the second anniversary issue, we bring you a few inspirational examples of people on their way to retirement riches.
Each story that we have featured showcases a different situation that you can draw parallels from, irrespective of your age or gender. We have tried to outline concrete steps that you can take to get started on planning your retirement corpus.
In retirement planning, as in life, just remember the Murphy’s law—if anything can go wrong, it will. The surest way of tackling unexpected problems successfully is to start planning as early as possible. Getting started today will place time on your side, so you can not only retire rich but retire early, as the Sukhatankars discovered.
But what if you have had a late start for some reason? Take a leaf from J.S. Gogia’s book to learn how you can put together a decent retirement corpus despite procrastination.
No matter when you start, the key to building a nest egg is to focus on repaying all your debts and to build assets, especially a home. As citizens of a country steeped in the family-first culture, most of us implicitly understand that we are our parents’ pension plans.
While retirement advertisements portray smiling elderly couples, there are enough and more people who will face retirement alone, by choice or because of life’s vagaries. Read how Single in the City author Sunny Singh built her own safety net.
In fact, women, whether single or married, have been credited with managing finances more often than men. Read what women have to say and what they must do when it comes to retirement planning.
According to the AXA Retirement Scope survey released in January this year, Indians do not associate retirement with age. These days, where to retire becomes as crucial as when to retire. The market has recognised retirees as a significant consumer class and extends several benefits to them.
Whether you are 10 years from retirement or have just started your career, read on to unravel the financial mysteries of life after work.
THE LAST WORD “I have now the gloomy prospect of retiring from office loaded with serious debts, which will materially affect the tranquillity of my retirement.” |
