Retirement means different things to different people. Although governments and private sector organizations define retirement ages, the age of retirement is blurring in this modern world of gigs. Expertise and demand for one’s expertise define the age of retirement.
Therefore, if you have skill sets that are in demand and you wish to work (provided your health permits), you can do so. On the other hand, even if you are hale and hearty, you can choose not to work. In that case, you may need a retirement plan. But despite so much progress and availability of opportunities, it is not practically possible for most people to work beyond a certain age. With advancements in healthcare, the average lifespan has also increased.
As per a report titled, The Future of Retirement, the Cost of Ageing, by HSBC, 20% of the people do not foresee any challenges post-retirement despite not having accumulated any significant savings. A staggering 68% expect their children to take care of their needs in old age.
With increasing nuclear families, migration to urban and global locations, most senior citizens find themselves stranded alone, left to fend for themselves in their hometowns.
The report also states that almost 56% of the working population lives paycheque to paycheque, putting themselves at grave risk for the future.
As a result, most senior citizens end up enduring retirement rather than enjoying it. This can be avoided if people do not get carried away with some common hearsay about retirement.
#1 Too Young to Start Saving for Retirement
It is never too early to start planning for retirement. If you start early, your wealth will grow much faster due to the power of compounding. Moreover, you can start with small investments each year and still build a sizeable corpus by the time you retire. A large corpus helps you live off the returns rather than eat into the core principle.
#2 Too Late to Save For Retirement
Better late than never!
Even if you realized the need to save at the age of 45, a systematic plan could help you build a good retirement kitty. Look for the best pension plan in India that initially allocates a large portion of your money into equity. In the years closer to retirement, the fund will move most of your money to safer debt instruments.
Life insurance plans give a dual benefit of providing life cover as well as a predictable stream of income post-retirement. The best retirement pension plans in India are some of the safest long-term plans and give you the following two options:
A. Immediate Annuity: Where your pension starts immediately after you invest your money
B. Deferred Annuity: You can invest now and start your regular income a few years later
Pension4Life Plan of Canara HSBC Oriental Bank of Commerce Life Insurance offers both annuity options. In an Immediate Annuity, you must invest a large sum of money immediately. In the Deferred Annuity option, you can invest over a few years to build a corpus, which will turn into regular income after the vesting period.
#3 Don’t Have Enough to Invest
If you have just started working, you may feel that your salary is just about sufficient to meet your expenses. It is tempting to procrastinate financial planning for retirement savings, but this can be risky. Even small savings started early grows into a large fund over the years. You can keep increasing the proportion saved as you progress through your career.
You can explore guaranteed return plans that look at protecting life, generating an income stream, giving away loyalty additions, and financially supporting the family till the end of the policy period. For example, the Guaranteed Income4Life plan of Canara HSBC Oriental Bank of Commerce Life Insurance gives out a regular stream of income after the premium payment term is completed.
#4 Your Inheritance is Enough to Cover the Expenses
Inheritance may or may not suffice depending on the type and size of the asset. Liquid assets are generally easier to utilize when needed. If you inherit real estate such as land, you may have to either sell it off or reverse mortgage it to avail a cash flow. Both cases depend on the location and demand for such a place. A house may generate some rent provided it is in a place where there is a demand for rented houses. While selling off property, any existing loans will also have to be cleared. The market value of all such assets must be ascertained first.
#5 Post Retirement, your Expenses will Decrease Significantly
The cost-of-living increases year on year. If your money does not grow faster than the rate of inflation, you will not be able to maintain even the same lifestyle in the future even with the current level of expenses. Healthcare becomes an important factor in old age and the costs associated must be factored in. People also require more helping hands in old age which will cost money.