In a country that has scant social security, where families are becoming nuclear and there is a large machinery in the financial industry that is led by its own profit-making endeavours, the responsibility of retirement planning rests squarely on your own shoulders.
The government’s defined benefit pension schemes have largely become unhinged due to lack of adequate funds. A recent State Bank of India report calls going back to the old pension system a “fiscal hara-kiri”. The traditional Employees’ Provident Fund, Public Provident Fund and now the New Pension System seek to help but the initiative lies firmly in your hands, especially if you are a private sector employee. Are these schemes enough in themselves? Look at the inflation numbers and calculate your requirement, and you will realise that the task of planning for retirement is not easy. For instance, a 25-year-old whose monthly expenses are Rs 50,000 today, will require Rs 3.84 lakh per month when he turns 60, assuming an annual inflation of 6 per cent.
That apart, there’s a dearth of other facilities in India, from efficient and affordable retirement homes to medical facilities customised for the elders. The costs of a few available options that may meet even decent standards of living are inhibiting.
Traditionally, children provided financial security but with changes in values and lifestyle, even that is coming apart. Stories of seniors struggling with their measly incomes or ‘dole-outs’ by well-settled children abound.
The path to retirement planning, however, is far from smooth, with an agent lurking at every corner to mis-sell products: high-cost insurance policies that do not give even inflation-beating returns or regular-income, high-risk AT1 bonds that are packaged as a fixed deposit or houses that crumble or leak from every corner after just a few years of buying and do not guarantee a roof over your head as you may have expected.
Outlook Money’s retirement planning issue will help you jump through the hoops, sidestep the dangers and overcome the mental blocks. We hope that you reach your last milestone with elan, composure and dignity. Don’t forget that planning for a nest egg is only the first part of the challenge. The second, and perhaps the more crucial, part is making your retirement kitty work for you to last a lifetime.
This issue also carries a guide on how to get education loans to help the Gen-Z and their parents plan better as admissions start rolling for courses abroad. However, make sure that the desire to go abroad does not supersede an honest assessment of whether it’s worth your time, effort and, of course, money.
We know investing in equities and cryptocurrencies is in vogue and thrilling. The ads will spur you but ensure those disclaimers don’t escape your notice. Any uninformed investment could spell disaster: from wiping out your account, making you completely risk-averse (in the process, robbing you of potential returns in the long run) to landing you in debt.
If you do find yourself in a debt net that gets tangled with every move, we have a get-rid-of-debt strategy that will help disentangle those knots. Securing your future lies in the steps you take today.
After a lifetime of supporting children and being financially independent, few would like a role reversal later. If that requires cutting corners in the planning stage or comes at the cost of keeping your retirement kitty for yourself and not spend on, say, a foreign education that may not really benefit your child but rob your independence in your retirement, so be it. You wouldn’t want to be remembered as a dependent. Make it about you and create a memory your loved ones will love to remember.
Nidhi Sinha
Editor, Outlook Money
nidhi@outlookindia.com