If we talk to some young person about retirement who has just got his
first job, he may definitely laugh on us.
In India there is almost no seriousness for retirement planning and
talking to someone who has just started working is too long for planning. At
the mass level, people are very short sighted and plan for their short term
goals, but not “long term goals”
Why retirement planning is important?
As we all know the inflation is the biggest enemy for any person who
need to survive in future. Although the inflation numbers may not look very
high in govt. statistics but if we talk about actual cost of living the numbers
are quite different. If we assume 10% rise every year in our cost of living
then for every 7 years, we require almost double of the amount to maintain the
same cost of living.
So for a 30 year old person if we assume he would retire at 58 then the
money required for same life style will be 16 times of the current value. Yes
it’s not a small number. If a person’s monthly expenditure is 25000 today he
will need about 4 lakhs at the time of retirement.
But still people don’t plan for retirement, why so? Let’s understand the
reasons and also why we should actually plan it.
1. It’s too early
As mentioned above, most of youngsters feel that I have just started
working so I have different priorities. The top most thing in his mind right will
be “how to buy the house?” or a New Car and maybe how to get the better pay package
in the next job?
Thinking of retirement at this age is simply too much when there are so
many other things before that. But the fact of life is that everything comes on
its time and if we have not planned it in advance we have to suffer at that time
and we can’t go back to plan again. So let’s plan the things when we have time
to control it.
2. My Kids will take care of me
In India there is a famous saying that our children are “Budhape ka
Sahara” this holds true even today for many of us and yes we have much better
social fabric compared to western countries and lot of children take care of
their old parents. But still there are many people who don’t want to be
dependent on their kids. They want to give the best to their kids and raise
them as amazing people, but then they do not expect anything back from them.
There was a famous movie “BAGHBAN” of Super star Amitabh Bachhan which
reminds us of some hard truths about life. It’s good that our children may take
care of us but should we totally dependent on them?
3. Don’t have Money
This is a very common reply if we ask some youngster. It’s getting tough
to save in today’s times especially if you are single earning member in family
with 5-6 people in a big city. Since this is last priority for a young person
and he have got so many other expenses lined up that for retirement there is no
money left.
But the hard core truth is “Just because you were not able to save
enough for future, no one is going to give you money at your retirement.” So let’s control the expenses and start
saving whatever little we can start with and increase it gradually.
Even if we start saving small amounts we can create a good corpus if we
continue for a long time. For example Rs. 5000 saved every month can create a
corpus of about Rs. 2 cr in 30 years (assuming annual return of 12.5%).
4. We can’t visualize for so long
Future is unknown and uncertain, and generally we can’t predict what
will happen after 10-20 or 30 years later so we also don’t worry about it much.
Therefore most of us are unable to visualize how serious it is to plan for
retirement and how tough it will get if they do not have enough retirement
corpus.
It’s not easy to look far ahead in future and visualize it especially
when we have a very active income right now. Just like its very tough to image
how it feels to be hungry, when we are easily getting 3 meals each day. Our
salary/regular income will stop coming and still we have to live another 30-40
years, its not that easy we don’t have enough money to take care of regular
expenses including rising medical bills.
As we become older, our health will not be at the best level and kids will
be busy and struggling with their own life issues hence may not be in position
to take care of in the same way we had expected.
There are various examples of successful people who died poor and
struggled in their retirement life. If we do not have enough money at
retirement, we do not have power. People do not treat well, and that’s the
harsh reality of life.
5. So what should we do?
We should do some basics to create a retirement corpus, which will be as
follows:
1. First calculate the time of retirement
2. Find out currently monthly expenses and amount required at the time of
retirement.
3. Calculate the corpus required and amount to be invested to achieve
it. Take professional advisor’s help to get the clear picture.
4. Invest among different asset class i.e. equity & debt to
diversify the portfolio
5. Be debt free at the time of retirement
6. Be disciplined in the investment. Invest regularly and increase it as
the income increases.
7. Don’t touch the retirement corpus for any other purpose.
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