Although we keep on hearing that our environment is deteriorating, the air is polluted and water is contaminated, the average life expectancy keeps on rising. In 2000 average Indian life aged about 62.5 years, in 2020 it averages almost 70 years. If we look at the projections 30 years from now the average life expectancy would be almost 75 years.
This coupled with the declining retirement benefits from social security means you need to start taking your retirement savings seriously, and soon. One of the primary steps to plan for a better retirement is to get a hang of the reality first.
Where do you stand? What will it look like? And most importantly, “what do you want your retirement to look like?” To answer these questions first we need to look into the few things which are bound to be a part of our retirement, especially if you plan to retire in the next 30 years.
1. Technology Enabled Interactions
A lot of our interactions will be online, for example, consultation with a physician, financial planner or advisor, even with family members and relatives. What does this mean, for future retirees?
This means a lot of travelling needs would be leisure only. Even your investments, financial management, withdrawals and pension management will be online.
Even now, you can use online pension calculators to estimate your pension needs and select investment plans. These retirement calculators will also give you how much to invest and for how many years.
2. Working Even after Retirement
A recent survey of young professionals and retirees indicated an average expectation of having to keep working even after retirement. More than half of those surveyed expected to work after retirement.
This could be true for more working people now than expected, given the inflation and uncertainty of investment returns. However, not all will be based on the needs but also due to the ease of working from home using mobile devices.
But, for a majority of retirees, it may be necessary to keep earning so far as possible to mitigate the risk of living too long.
3. Moving to a Smaller City
Managing your expenses post-retirement is an important and big challenge. Moving away from major cities could help keep your regular expenses low. Also, if you own a property in metro cities by the time you retire, it may come in handy for generating better rental income.
Smaller cities would mean slower life, lower facilities and lower costs. But, provided 30 years later much of this would be better than today, the benefits may still last.
4. High-Risk Investment for Better Retirement Security
If you have been thinking of investing heavily into stocks while you still have time, you are not alone. Majority of Generation Y is ready to invest in high-risk instruments to improve their ROI on retirement savings.
Fortunately, the providers of pension plans and retirement saving solutions are capitalising on the need. Modern pension plans not only offer equity allocation but also provide the option to automatically rebalancing the asset allocation.
For example, Canara HSBC OBC Life’s Invest 4G plan not only lets you choose a mix of equity and debt portfolios, but you can also select a dynamic asset allocation strategy. Few of the unique strategies in the plan are:
This strategy is best for you if you want to invest once a year in the plan. This option will help you benefit from rupee cost averaging even when you are investing a lump sum. Under this strategy, the part you have allocated to equity funds is kept in a liquid fund. Then the units will be gradually transferred to the selected equity fund over the next 12 months in equal parts.
With this strategy, you can fix the allocation of your portfolio between equity and debt. The plan will automatically rebalance your portfolio depending on the market performance from time to time.
This strategy can keep your investment risk level and helps you ride the market waves. It will increase your equity allocation when markets are not doing well and decrease allocation when markets are running at highs.
This option gets activated in the last four years of your plan. Purpose of this strategy is to save your accumulated funds from bad equity markets in the final few years of your investment. This strategy automatically transfers all your equity fund allocation to liquid funds over the last four years period of your investment.
The best part with these investment plans is that you can continue to invest in them till the age of 70. Meaning, they’ll be handy if you continue working after retirement.
5. Dependency on Govt. Schemes for Healthcare
Like many other necessities of life, healthcare as well will continue to become expensive. That simply means you may need more social support for health care, especially in later years of life.
You can still use senior citizen health insurance plans until the age of 85. However, the premiums may become prohibitively high at a higher age. Thus, for regular healthcare expenses not covered by the insurance, you will need additional support from government schemes.
Invest Aggressively for Safer Retirement
With all these challenges and increasing economic volatility, it’s better to help your money ride the wave, rather than seek safe havens. Modern retirement saving plans like Invest 4G, EPFO’s New Pension Scheme and pension plans from life insurers offer equity growth to your retirement savings. Start using these plans early to ensure a financially safe retirement.
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