You will want to live the same lifestyle that you have today, even after retirement. What do you want to do in this second innings of life? World Tour, Charity, Volunteer work, start a business etc. Aspirations and needs for retirement vary from person to person. A comprehensive retirement plan is therefore very important so that, after retirement, you can maintain your daily expenses without any burden while living the life you’ve always dreamed of.
Indian population is ever-increasing and according to reports, India is expected to shift from a predominantly young population to an aging population in the next 30 years. In 2050, India is expected to have aged population over 300 million. Money management to facilitate joyful retirement is going to be one of the main concerns of this aging population. Fundamentally, retirement planning is one of the most vital financial goals of an individual’s financial journey, but sadly it is the most neglected one by majority of them. Planning for this second innings is not on the priority cards for most families.
“Second Innings” is related to the most popular sport in India – Cricket and the term comes from not so popular version of it – The Test Cricket! Each team gets a chance to play two innings and result of the match depends on the team’s comprehensive performance in both innings. Similarly, a person’s financial journey is split into two innings – Working Life & Retirement Life.
What is Retirement Planning?
Simply put, a fund that provides for all you need in retirement, including financial, leisure, medical, and emergency needs as well as those in your joyful retirement wish list. Planning for retirement involves a number of important factors, such as identifying sources of income, estimating short-term and long-term expenses, managing assets, balancing savings and investments, and planning for investments. The key to determining retirement income is to project future cash flows. The process of planning for retirement is a lifelong endeavour, but when you begin planning for it early, you’ll reap its sweet rewards sooner rather than later. Furthermore, you can also control cash flow, revenue, and expenses and figure out how much risk you need to take to hit the bull’s eye.
Why plan for retirement?
Declining Retirement age –
In recent generations, the average age at which someone starts working has increased due to more emphasis on higher education and vocational training. People are retiring at younger ages, voluntarily or involuntarily. In some cases, health problems can force people to retire earlier than the official retirement age. Your working life (1 st innings) is the period in which you save for retirement. The decline in working life length makes retirement planning more challenging and important.
Increasing Life Expectancy –
The advanced medical science may give you a much longer life expectancy than you expect. A longer life expectancy is clearly a positive development. Having a longer life means spending more time with loved ones and fulfilling your dreams. That’s great news if you’re well prepared. Nonetheless, if retirement planning isn’t a priority, living longer can be a bit frightening.
Non-existence or inadequacy of pension cover –
Majority of Indian work force do not have pension cover. Even for government employees, the age of defined benefit pension scheme is over. Furthermore, employees covered under EPS and NPS may find it difficult to maintain financial independence and lifestyle in long retired life if any additional thoughtful efforts are not taken.
You’re Retiring, Not Inflation –
Inflation is immortal. Retirement spending is often underestimated by investors. Education and transportation expenses will decrease, but other expenses will increase due to inflation. With inflation of 5% per annum, current monthly expenses worth Rs.50,000/- will increase to Rs.2.3 Lakh in 30 years and Rs.5.7 Lakh in 50 years.
Medical Emergencies –
Medical emergencies strike without warning, putting retirement finances at risk. Having adequate health insurance coverage can reduce the impact. In a few cases, it may not cover all expenses. As a result, with a good retirement plan, you must accumulate enough assets to cover any medical emergencies in retirement.
To avoid follow-on:
Who would like to work for survival post retirement age? The key to avoiding follow- on in second innings is a sound retirement plan in first innings. Remember, second innings should be filled with moments of pride, not embarrassment.
When to Start?
ASAP!
Starting retirement planning from the very first salary is more beneficial. The best retirement plans are usually started at an early age. A good first inning can ease the burden of the second inning. Hence, starting early in the first innings in vital. Interestingly, early starters need not work hard; instead they can work smart by taking an advantage of compounding. Investing in Mutual Funds and specially designed Retirement Benefit Funds through SIPs can be the game changer.
When you score well in the first innings, you’ve won half the battle. This match cannot be lost now. Any unforeseen events in the later stages would still result in a draw, which is still respectable compared to losing the match due to inadequate planning. The Test of Retirement Planning is on, don’t wait any longer, and get
started now.
