With assured pensions becoming a thing of the past, Retirement Planning has become an imperative for every Indian. A higher cost of living, the advent of aspirational lifestyles, evolving socio-cultural equations and volatile economic dynamics all contribute to necessity of planning for retirement as soon as one starts earning. However, a recent study by Max Life Insurance and Nielsen on Retirement Usage & Attitude covering 1091 male respondents in the 31-50 years age bracket across the country reveals that even though Indians realise the importance of retirement planning, a majority of the working population is yet to embrace the concept. Evidently, there is an urgent need for working people to wake up to the reality that in the absence of retirement planning would have a negative impact on their lives.
Retirement: Perceptions v/s Reality
The Max Life Insurance and Nielsen survey reveals that retirement, as a phase of life, has more positive connotations than negative, with a majority of respondents looking forward to new beginnings filled with more independence compared to their working years, peace of mind and the opportunity to live life on their own terms. While 10% of the respondents anticipate greater financial independence – believing they will have more money at their disposal during this phase – only 1% accepted that their retired years could imply financial struggle. Paradoxically, even though 75% realise that their routine expenses are likely to increase post-retirement, the majority did not have a plan to counter the rise in expenditure.
Merely 28% of the respondents of the Max Life Insurance and Nielsen study have started planning for retirement, a majority of which have invested in life insurance policies while the others have opted for fixed bank deposits, realty and gold among others. Only 4% of the entire respondent group had invested in a life insurance pension plan which guarantees monthly returns. OPTION 1: From the remainder 72%, a huge 60% do not have any back-up plan while the remaining plan to rely on their existing wealth or children
The Dawn of Realization
It is not sufficient to merely save for retirement. In the absence of proper planning or without the foresight of a clear goal, 50% of the respondents conceded to ad hoc and convenience based investments saving only when they have additional money without the guidance of a professional financial advisor. An even more dangerous tendency among as many as 37% of the investors was their refusal to review their retirement needs before retirement. This is an alarming attitude especially in the context of increasing inflationary pressures, rising medical costs and rapidly changing lifestyles. Ironically, a majority of the investors in non-metro cities ignored inflationary effects while planning their retirement funds while more than 50% in the overall investor group were oblivious to rising medical costs.
The average retirement age in India is 59 years for which, most believe, the ideal time to start retirement planning is 39 years. However, given the enormity of the task at hand, any financial advisor would know that this benchmark is too delayed to make the maiden investments for the retirement corpus. Indeed, the earlier one starts planning for retirement, the better and easier it is. It is easy to save for retirement during the early stages of one’s career when there is no pressure to support a family and minimal health expenses. Deferment in retirement planning will imply a ‘cost of delay’ – and greater the delay, higher the costs. Even in the Max Life Insurance and Nielsen survey, 65% of the retirement investors were of the opinion that they should have started earlier and at least a third expected to fall short of funds during their retirement years.
The Necessity of Planning
The knowledge of financial resources required as against the resources available at the time of retirement is higher among those who are closer to retiring – implying late realisation.
In the Max Life Insurance and Nielsen survey, 79% of the respondents chose life insurance as the instrument for their retirement savings with as many as 54% of them owning multiple policies. Further, 64% of the non-investor group intended to invest in life insurance policies, followed by fixed bank deposits and realty and gold. Life insurance is an appealing option for most investors because the perceived safety and guaranteed, high returns besides the tax benefits that are available at the time of investing.
Retirement Investment is a Matter of Choice, Not Chance
Hoping for a comfortable life after retirement will not help – working towards it will. Judicious, proactive financial planning is the key to a rewarding and peaceful retired life without having to worry about the implications of the socio-economic dynamics of the economy on your lifestyle. Plan your retirement under the guidance of qualified professionals who will help you build a balanced portfolio while minimizing risks, safeguarding your interests and ensuring guaranteed, high returns. It is never too early to plan for your retirement – just ensure you are not too late!
Prashant Tripathy, Chief Financial Officer, Max Life Insurance
NOTE: The views expressed here are those of the author and not of Express Group.