Retirement planning is one common thing that is the same for all if it is rich or poor, a business man or a working professional. But most people don’t prioritize it as need. One should know the retirement planning aspects like post retirement corpus required to generate monthly cash flows, monthly expenses including health care with inflation effect, time left to retire, monthly preretirement investments, etc. Most of the people are ill-planned financially and retire from a paid job. It is necessary to plan for retirement in advance due to the below reasons:
Lengthening of individuals’ life span: At the time of independence, India's life expectancy was around 33 as per statista.com, and it has raised to 69.73 in 2020 and 69.96 in 2021. Living too long is risky if not prepared for the same.
The rising cost of living due to inflation: Personal lifestyle will become much expensive due to improved life expectancy with increasing inflation, and it will be continuously increasing. In 1920 monthly household expenses were Rs 1. In 1940 it was Rs 10, increasing by 10 times for two decades, so it was 1960 Rs 100, in 1980 Rs 1000, in 2000 Rs 10000 and in 2020 it was Rs 100000/month. So if a person was retiring at age 60 in 2020, if he survives till age 80, his monthly expenses will be Rs 1,00,000 at age 80, and accordingly he has to plan for the retirement corpus.
Increasing Medical expenses - With changing times, new diseases, and health issues, healthcare inflation is inching up, which may make a significant dent in post-retirement finances. As per the Insurance Information Bureau of India, medical inflation is 10% year on year for the past few years, and it has increased further tremendously due to Covid-19.
No Government-sponsored social security: - Unlike in the developed countries, there are no Government-sponsored social security benefits for all Indian citizens during retirement.
Change in family structure: Due to changing family system from joint families to nuclear families, in case of any crisis, financial support from extended families can't be expected.
Due to all the above reasons, one has to take the help of a professional financial planner. Start investing earliest possible, generate a large retirement corpus to provide enough monthly cash flows, and cover medical and all other expenses to have a comfortable post retired life.
Also read our other articles, "Misinterpretations during preretirement investing," "Making a realistic and winning retirement planning," "Portfolio Management tips during the retirement period," "Best ways to boost your retirement corpus."
By Team Wealth ATM
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