Indians are living longer. With improving healthcare facilities and better lifestyles the average longevity will only get extended from here on.
The Old Age Social and Income Security (OASIS) report that kicked off pension reforms in our country had projected that a person reaching the age of 60 in 2020 will have an expected life span of another 20 years, five years longer than when the report was submitted to the government in early 2000. Those of us who keep ourselves in better health will live longer.
This means preparing yourself financially over a working life of 35 years or longer to keep the tap flowing for another 20 years or more.
Calculations by our team in our detailed cover package on retirement planning show that a person with a monthly expense of Rs 24,000 who is due to retire 30 years from now will require nearly Rs 1.44 lakh a month as replacement income to maintain the same standard of living.
That is factoring in 6 per cent inflation, much lower than the present double-digit wholesale price inflation. To ensure that amount every month, one will need to create a retirement corpus of around Rs 4.5 crore. At 8 per cent inflation, the figure jumps to Rs 12 crore.
Staggering, right? Sure it is, but also not unmanageable, provided one plans well, and early. Your provident fund accumulation might not be enough. And if you are one of those in the unorganised sector with no EPF benefits, which is more than 85 per cent of the population, you will have to do it all on your own in the absence of any social safety net.
Pension reforms are stuttering ten years after the OASIS report. The pension regulator, PFRDA, remains a body without statutory backing. The National Pension System has been a virtual non-starter due to faulty planning.
Most often, retirement planning keeps getting postponed until it is too late to have a healthy nest egg. However, while providing for immediate needs such as rent, EMIs, food, children's education and a bit of leisure and entertainment, one must also spare a thought for one's retirement years, which will not remain distant as the years quickly roll by.
If you start early, it does help since the power of compounding works silently, while the kitty rides out the economic cycles. Otherwise, your retired life can become a drag, instead of being one of the most enjoyable and peaceful periods of your life.
However, if you are one of the late starters with not many years left for retirement, don't lose hope. The country's high growth trajectory has thrown open new avenues to continue earning well beyond the stipulated retirement age. That is what we explore in the last story of our cover package, just in case you need those extra few rupees.
Well, why retire fully when you can have an active life?
