Retirement Planning – is it relevant in India?

What could be more important than the decision you make to invest your money for retirement? As you will be aware after going through the article that building a retirement corpus is not easy and it takes years of savings to build the retirement blocks. So for building of the retirement corpus, one has to start early giving time for the accumulation to compound. Also starting early gives your investments time to swim through the volatility of the markets and helps you to build a good corpus so that retirement needs are taken care of. It is always better to have your retirement corpus targets in advance so that you can calculate backwords to find out  how much you need to save.

Doing the right thing

Today we have a huge gamut of investment choices available with us and also you have plenty of questions to answer about When, Where, How much, to invest. On one hand you will not want to be greedy and place your funds at risk, then again being too conservative may be harmful to your long term retirement goals. In this case you have to have a balance as per the time and risk profile. Creating a right balance in your retirement nest is a good idea but there are other ways to do the balancing act.

Heart of Retirement
H         How I can
E         Evaluate How Much
A         Accumulate
R         Return
T        Target Corpus

Demographics in India

1. Increasing Medical Costs : over the years our medical costs are going up with the advent of new medical technology and advance research in medicines, also absence of long term critical care insurance in India is a big handicap as this is the HEART of retirement planning.
2. Inflation: Prices of several useful things and commodities have risen rapidly over the last few years and the inflationary pressures will alwyas be there in a growing economy like India.
3. Higher Life expectancy: over the years  life expectancy in India has gone up to 80 years . This means now a person has to live more than 20 years in destitution if he has not planned well in advance.
4. Nuclear Family: earlier we used to live in Joint Family where people used to be cared in their old age. But with the disintegration of the joint families, one has to fend for himself in his/ her old age.
5. No Social Security: In the absence of compulsory social security savings, except for government and specific private employees, a large number of indians are devoid of any retirement or pension savings.
6. Lifestyle : we have seen growth in Lifestyle faster than inflation thereby increasing our expenses to maintain the lifestyle like cars , mobiles, travel, expensive gadgets etc.
7. In our country Children’s are the top most priority of the couples and they spend or save for their goals and fulfilling this responsibility takes the sweat out of them and Retirement becomes their lowest priority.  Hence retirement planning is not only about preparations for a secured and financially independent retirement but also entails arranging finances for these key life stage goals.

Retirement planning requires a holistic and prudent approach such as

• Identifying your retirement corpus
• Analyzing the current situations
• Profiling of risk
• Asset allocation and rebalancing it at frequent intervals
• Disciplining your investments and not withdrawing before the goal

Myths of Retirement Planning

• Not giving sufficient time for compounding
• Not accounting for inflation
• Poor asset allocation
• No strategy for contingencies
• Improper assessment of Retirement Corpus
• Not taking into longevity factor
• Not planning for medical exigencies

People often realize this once they reach or are about to reach the retirement age , but also realizing too late is an unguarded Mistake and it becomes difficult to live in post retirement stage often depending on charities or children support.

 lets also see why people fail to plan for Retirement
1. Lack of Knowledge of Financial concepts
2. Procrastination attitude
3. failure to understand the need
4. wrong selection investment vehicles
5. its too big a task ! I can’t save this much or my expenses are high

One thing you have to remember THAT YOU CAN BE YOUNG WITHOUT MONEY BUT YOU CAN’T BE OLD WITHOUT MONEY’

Now is the time to act and be proactive and plan your retirement.