From Savings To Security: How Indians Are Preparing For Their Sunset Years

The Outlook Money – Toluna Retirement Survey conducted in December-end 2023 threw light on how Indians plan and save for retirement. A growing number of Indians now understand the necessity of retirement planning, and want to enjoy their retirement years with kith and kin

Until recently, most Indians considered retirement to be a distant goal and often overlooked it with other goals, such as children’s education, taking precedence. However, with the growth in financial literacy and awareness, more people are now understanding the importance of retirement planning. We attempted to gauge the preparedness of individuals across India for this goal and conducted an online survey, the Outlook Money – Toluna Survey on Retirement, along with Toluna India. The survey comprised 1,735 interviews across 20-plus metro and non-metro cities (see Research Methodology).

The survey revealed that most people agreed that retirement planning should commence around the age of 35 years. Early planning is important, as people who plan early stand to gain over those who do not. This is because with the increase in longevity, they could find themselves in penury in their retired years due to lack of adequate planning in the working years. The sooner they begin to save for retirement, the lesser they will need to invest to reach to the required retirement corpus. The survey also revealed other trends about how people plan for their retirement and how much and where they save for this goal.

Retirement At Age 60

The age at which you want to retire is crucial. It will help you plan your retirement well in advance.

In India, the current retirement age set by the central government is 60 years. Until 1998, the retirement age for central government employees in India was 58 years. However, the Fifth Central Pay Commission, in May 1998 recommended increasing the retirement age of central government employees to 60 years. Half of the respondents in the survey expressed their desire to retire at age 60.

However, 17 per cent respondents in the age group of 30-39 years said they wanted to retire in their 40s, and 29 per cent said they wanted to retire in their 50s. The males outnumbered the females in terms of early retirement. Of the total 1,032 men surveyed, 11 per cent said they wanted to retire in their 40s, while only 6 per cent of the 703 women said they wanted to retire in their 40s.

City-wise, those from the non-metros expressed a desire to work longer. The average retirement age for respondents from metro cities stood at 61.1 years, while for those from non-metro cities, it was 62.7 years.

Retirement Preparedness

At the pan-India level, 75 per cent of individuals have begun planning for their retirement. However, regions with greater awareness, such as metros, showed higher levels of preparedness. Here, 76 per cent of respondents answered positively when asked if they were actively preparing for retirement. In the non-metros, this was just 72 per cent.

Also, younger individuals were more prepared than their older counterparts. A huge 79 per cent of respondents in the age group of 30-39 years have started planning for their retirement, compared to 67 per cent in the age group of 50-59 years.

Financing Retirement

Various avenues exist for financing one’s retirement, including personal savings, family wealth, and dependence on children. Yet, our survey revealed a clear preference among respondents, with the majority placing their trust in personal savings. A huge 88 per cent (1,300 out of 1,734) planned to finance their retirement through their own savings rather than depend on family wealth or children. They, typically, earmark around 20 per cent of the investment towards retirement goal.

Expert Help Or DIY?

Among those who have started planning for investment, 64 per cent said they took expert help, with the rest planning it on their own. Gender-wise, more women (66 per cent of the total 513 surveyed) said they took the help of financial experts, compared to men (63 per cent).

As many as 40 per cent of those seeking help from financial experts, said they relied on mutual fund distributors, followed by 37 per cent who sought help from their bank relationship managers. Surprisingly, only 10 per cent availed of the services of Securities and Exchange Board of India (Sebi) registered investment advisors (RIAs). This also  highlights a scarcity of Sebi RIAs. At present, there are only 1,369 Sebi RIAs available in India.

Where Do They Invest?

Mutual funds, life insurance, fixed deposits, stocks and gold were among the most preferred investment options for retirement planning, according to the survey.

Interestingly, the majority of respondent preferred to invest in equity mutual funds. Equity has the potential to earn better returns in the long term, and as retirement is a long-term financial goal, individuals prefer to invest in such products for inflation-beating returns.

When it came to products, people showed an equal preferrence to guaranteed-return products and growth products. Cash flow after retirement and liquidity was another criterion why people preferred these instruments, according to the survey.

Are They Insured?

After Covid-19, individuals seem to have realised the importance of insurance in their portfolios, which was also underscored by the survey. A striking 87 per cent of participants said they had invested in health insurance. Among those with health coverage, a substantial 88 per cent had policies with a cover exceeding Rs 5 lakh, with an impressive 24 per cent opting for coverage surpassing Rs 20 lakh. Concurrently, individuals prioritise a healthy lifestyle, with a notable 92 per cent admitting to leading active and healthy lives. They believed that healthy lifestyle could help them lead an economical life.

During Sunset Years

For many, uncertainty looms over settling into retirement. One thing is certain: people prefer to stay close to their loved ones and children in their retirement years. Forty-three per cent of respondents prioritised proximity to where their children or family resided, the survey revealed, while 24 per cent preferred locations with open spaces for walking and socialising, and 17 per cent prioritise proximity to healthcare facilities.

People also preferred to spend time with family and pursue their passions in their retirement years, the survey revealed. Interestingly, a few even wish to continue working in retirement, though the majority plan to travel regularly for leisure with family. After all, retirement marks the beginning of a new chapter in life, and offers ample opportunities for enjoyment and fulfilment beyond the constraints of work.

kundan@outlookindia.com