Perspective on Retirement Planning

Early planning for retirement is imperative in today’s age wherein advancements in medical science have helped increase life expectancy. In addition, a wide choice of career options and a fast paced life has evoked the thought of early retirement in the minds of the younger generation. With increased longevity and the urge to maintain a similar lifestyle in one’s post retirement phase as well, the need for appropriate retirement planning is an imperative.

According to Life Value Notes Life Freedom Index, a survey conducted in 11 tier 1 and tier 2 cities to understand the current state of financial planning in urban India, consumers are skeptical about the adequacy of their financial plans to meet their desired standard of living throughout their lifetime. In fact, only 13% of youth and women are extremely confident that they have adequate retirement planning in place. Though the Wisdom investor segment (45 years and above) scored better in the level of confidence yet their percentage stood at only 24%.

The study clearly points out that while we postpone a lot of simple joys of life to our retirement period, we do not adequately prepare ourselves during the prime time of our working lives to focus on building a war chest. These joys could range from travelling to cherished destinations to owning much coveted luxury goods or simply indulging in an expensive hobby.

In the absence of a formal social security framework in our country and inadequate statutory retirement funding (by both employers and self), there is a greater need to evaluate in advance the options available for Retirement Insurance Policy. A clear definition of our retirement needs is the first step towards adequate provisioning for retirement. The answer to this lies in two basic questions – “HOW MUCH MONEY would we need when we retire?” and “WHAT PART OF OUR INCOME should be invested towards building that corpus?”